China’s consumer sentiment starting to improve, surveys show

Chinese consumer sentiment improved in August, snapping several months of decline, though it remains weak compared to earlier in the year, according to two surveys.

Economists will be watching closely if the trend continues since consumption, a key driver of China’s economy, has slowed in recent months because of waning confidence and a housing market slump.

The share of consumers planning to spend more over the next six months and “trade up” to more expensive brands increased in August compared with June, according to a bi-monthly survey from Bank of America Corp. 

“Our latest August survey showed that consumers’ willingness to spend has improved slightly, likely helped by booming services demand during the summer,” Bank of America economists led by Helen Qiao wrote in a note.

A measure of Chinese consumer sentiment by US company Morning Consult also improved in August, while falling short of its 2021 peak.

Chinese consumer prices fell in July for the first time since 2021, partly reflecting weak consumer demand. But core CPI, which strips out volatile energy and food costs, remained positive.

With core prices still rising, that “shows improvement in domestic demand, so I think consumption might surprise on the upside in the coming months,” Dan Wang, chief China economist at Hang Seng Bank, told Bloomberg TV this week.

Consumption-related Chinese stocks have been lifted this week by record-breaking summer holiday cinema box office figures, and stronger-than-expected earnings at Anta Sports Products Ltd., one of China’s largest athletic apparel companies. 

The MSCI China Consumer Discretionary Index has risen about 3.2% this week, poised for its biggest advance in nearly a month. Still, the gauge remains at only around a third of its 2021 peak.

China retail sales growth slowed to 2.5% in July, with falling property sales hitting demand for building materials and home appliances. Consumer services growth was much stronger than housing-related goods, according to a Bloomberg Economics report this week, which noted “pockets of strength” in consumer spending such as summer-holiday related demand during August.