Consumer sentiment fell for the second consecutive month in September as the outlook for employment deteriorated sharply and consumers showed increasing signs of nervousness about their personal finances and the housing market.
The Westpac MNI China CSI fell by 0.1% on the month to 113.2 in September from 113.3 in August. While the monthly decrease was small, sentiment is down 7% since January, with consumers reassessing the state of their household finances now and in the future. For Q3, sentiment hit the lowest level since Q4 2011.
There was relative stability in the components that make up the Westpac MNI CSI. Both Current and Expected Personal Finances fell slightly from already low levels, while sentiment for Business Conditions in a Year picked up a little but remained subdued. Both Business Conditions in Five Years and Durable Buying Conditions remained broadly unchanged.
Other data highlighted the growing unease among respondents. Labour market concerns were at the forefront once again with the Employment Outlook Indicator falling for the fourth consecutive month in September, to the lowest since February 2009.
Regarding real estate, expectations for house prices fell for the third consecutive month. The percentage of respondents reporting it was a ‘good time to buy a house’ fell further, while the proportion of consumers nominating housing as the ‘wisest place for their savings’ fell. Those nominating it is a ‘bad time to buy a house’ felt their own income was a larger factor than policy settings in coming to this assessment, implying that stability in the housing market will require an improvement in overall labour market conditions, not just an easing of direct housing controls.
Commenting on the data, Chief Economist of MNI Indicators Philip Uglow said, “Consumer sentiment remained subdued in September leaving Q3 confidence at the lowest level for nearly three years. Coupled with a weaker reading from our sister China business survey in September, it raises questions about whether the authorities’ efforts to support the economy since the spring will be sufficient to keep growth in line with the 7.5% target this year.”
Westpac’s Senior International Economist Huw McKay commented that “Back in June, the employment indicator was sitting at levels that have been associated with policy easing in previous cycles. Three consecutive declines from those already depressed levels in July, August and September, alongside the weaker official data for July and August, collectively provide a watertight case that it would be most unwise for the authorities to return to a neutral policy posture. Selective monetary and fiscal easing ought to continue, in addition to a further loosening of housing controls at the local level.”
“The risk appetite of consumers, as measured by their preferred asset classes, decreased materially in August, with far fewer respondents nominating domestic real estate as the wisest place for their savings. Furthermore, the proportion nominating “future loss of income or employment” as their main motivation for saving increased sharply to the highest level on record,” he added.