In June, consumer sentiment on current conditions rose by a strong 2.5 points from the previous month as general price rises continued to ease with the seasonal price falls with vegetables and fruits. Sentiment on both current personal finances and durable goods purchases rebounded. In terms of future expectations, though the recent financial crisis in Vietnam had triggered concerns on whether China could continue its economic development in the time ahead, consumers' future expectations index performed relatively well and fell only a modest 1.2 points in June, due to an enhancement in overall national confidence developed from the earthquake rescues. Among all components of the future expectations index, expectations on business conditions five years from now declined only 0.5 point, indicating that confidence still exists among consumers in the long term economic development in China.
In contrast, after Hurricane Katrina at the end of August 2005, the September consumer confidence survey of the University of Michigan showed a 10.1-point drop in consumers' sentiment on current conditions and an even sharper 13.6-point fall in that on future expectations.
As the Olympics approach and negative factors such as inflation seem to be controllable within a certain period, the eziData analyst believes that consumer confidence is not likely to fall much in the next couple of months but should stabilize or rise back.
Although the Shanghai Composite in June went all the way down to break 3,000 points, consumer confidence in stock investment did not collapse but stagnated at low levels. Consumer sentiment on expectations of stock investment returns in the next twelve months remained unchanged from the previous month. However, it is perceived that the stagnation at low levels caused by investors' hesitation and wait-and-see mindset may not last long. If the Shanghai Composite could not rise back to a level above 3,000 points, it is very probable and the expectations on stock investment in July will fall.
Although consumer expectations of future price changes kept rising for several days following the Wen Chuan earthquake news in May, expectations in June did not follow the same trend but remained at the same level as in the last month, indicating that the impact on general prices by the earthquake so far was only about psychological expectations and has not constituted a real impact on the economy.
In terms of major cities, consumer sentiment in June rose in Beijing and Guangzhou, but fell in Shanghai. Encouraged by an easing in the general price rises and inspired by the upcoming Olympics, consumer confidence in Beijing surged a full 9.9 points in June to 99.2 after a 5.9-point drop in the previous month, getting back to the level of January and becoming the highest reading among all three cities again. All five components of the overall confidence rose, with current personal finances surging.
Sentiment among Shanghai consumers performed poorly in June, as a drop in future expectations failed to offset a rebound in current conditions and dragged the overall confidence down by 2.3 points, which was the second drop in a row following the May decline. And among all five components of the consumer confidence index, current personal finances rose and durable purchase intentions remained basically unchanged, while all three components of future expectations fell, especially the five-year business outlook which had been rising in April and May.
Consumer sentiment in Guangzhou rose another 0.8 point in June following a rise in May. Sentiment on current conditions rose, with that on both current personal finances and durable goods purchases surging. Future expectations fell, mostly due to a significant fall back in the one-year personal finances.
