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ChartBrief #12 Chinese Consumer

The Westpac/MNI Consumer Sentiment survey for September (just released) rose 3.7pts to 115.2. This is a volatile series that changes a lot month to month; the 3 month average was 113.6 against the long run average of 119.6. So while the improvement is worth noting it remains below average. But more important than the month-to-month fluctuations: it seems the Chinese consumer has an important message on the outlook for property prices in China.

China property slowdown is coming

The graph shows the 3 month smoothed year-over-year change in the Westpac/MNI Consumer Sentiment survey (which by the way is a private survey, so no worries as such about the government meddling with the data) compared to the year on year change in property prices - with consumer sentiment pushed forward 6 months (consumer sentiment appears to lead property prices). The conclusion is pretty clear - the outlook is for a slowdown in the property market.

Naysayers of this analysis will say the indicator didn't work very well on the previous peak, and to be fair the signal was early last time - but it was right eventually, and in fact it picked the worst downturn of the Chinese property market on record (so far...). On that point, the cyclical picture has been looking better in China on the back of some fairly powerful stimulus measures, although there are some early signs of property stimulus measures starting to be toned back (e.g. purchase restrictions in the top cities). So while it could take some time to play out, given the importance of the property market for China - and for those who rely on China - this is one to keep an eye on.

Bottom line: The trend in consumer confidence is pointing to a property price slowdown in China.

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