Economy

Consumer confidence rises in Q1

By Hu Yuanyuan (China Daily)
Updated: 2011-04-22 09:18

A vegetable vendor at a marketplace in Yuncheng, Shanxi province. Consumer confidence rebounded in the first quarter this year, after previously falling for two consecutive quarters. [Photo / China Daily]

People's willingness to spend goes up across all regions, survey says

BEIJING - Consumer confidence rebounded in the first three months of this year after a slide in the last two consecutive quarters, as inflation concerns began to ease and people's willingness to spend increased.

The consumer confidence index, jointly released on Thursday by the China Economic Monitoring & Analysis Center (CEMAC) of the National Bureau of Statistics (NBS) and The Nielsen Company, showed that China has a score of 108, up from 100 in the fourth quarter of last year and representing the highest level of confidence since 2009.

Related readings:  China's consumer confidence up in Q1  Consumer confidence on the wane as wage law sparks job worries  Consumer confidence rebounds in Feb  China consumer confidence rebounds in March

"With government policies to stabilize inflation coming into effect, as well as a commitment to carefully monitor prices going forward, consumers have regained their confidence swiftly," said Mitch Barns, president of Nielsen Greater China.

The consumer price index, a main gauge of inflation, hit 5.4 percent year-on-year in March, reaching a 32-month high, the NBS statistics showed.

Since October, the central bank has raised the benchmark interest rates four times and told the country's lenders to lock up a record 20.5 percent of their deposits as reserves to curb inflation and mop up excessive liquidity.

Pan Jiancheng, deputy director-general of CEMAC, said the bounce back in consumer confidence is in line with expectations as the nation's economy continues to show steady and relatively high growth.

China's economy expanded by 9.7 percent in the first quarter, marginally lower than the 9.8 percent registered in the last quarter of 2010 but beating economists' expectations of 9.5 percent, according to the NBS.

"Despite the rebound, we still need to be careful, as further price hikes remain a very real possibility and could hurt consumer confidence in the future," said Pan.

The survey showed gains in almost every facet of consumer sentiment this quarter; people's willingness to spend registered a strong increase and consumers' expectations of future price increases dropped slightly, with a decline of 2 percentage points from the last quarter.

Moreover, consumers were increasingly optimistic about their job prospects over the next 12 months.

In the largest survey of its kind, Nielsen and CEMAC surveyed more than 3,500 shoppers across China's cities, towns, and villages.

"The good news is that income is rising faster than inflation, particularly in rural areas, and people's living standards continue to improve. As a result, we continue to see strong growth in marketplace demand, even in discretionary categories," said Barns.

In a bid to boost domestic demand, the proposed move to raise the personal income tax threshold from 2,000 yuan ($306) to 3,000 yuan will also have a positive effect on consumer confidence.

"As middle- and low-income families account for a major proportion in our survey sample, the change of personal income tax levy will help boost China's consumer confidence index in the second quarter," said Barns.

According to the data organized by city tiers, confidence among consumers in the rural areas continued to strengthen, increasing 6 percentage points to 113, near the record high set in 2009.

"This was largely driven by a strong optimism among the consumers about future job prospects," said Barns.

Although inflation has been on consumers' minds, the number of those who believe it is a good time to spend went up by 8 percentage points from the previous quarter to hit 38 percent. Willingness to spend improved across all regions and city tiers, according to the survey.

However, most consumers believe real estate prices will continue to rise.

Almost three-quarters of those people surveyed said home prices would rise over the next 12 months, up 6 percentage points from the fourth quarter of 2010.