Chinese households were only slightly less exuberant in December than in November, with our sentiment index slipping from the previous month’s record high. Consumers said their incomes continued to increase at a record pace but their discretionary spending rose more slowly, while views on the economy were less bullish than in November.

The FTCR China Consumer Index fell 0.8 points to 74.8 in December but was 4.5 points higher than in the same month last year and 9 points higher than in December 2015, when global markets were wobbling amid fears of a Chinese hard economic landing.

Chinese household sentiment has made a remarkable recovery in the past two years, supported by government efforts to stimulate the housing market. We expect sentiment to cool in 2018 as that stimulus is withdrawn, but that households will remain upbeat as the government continues to target a relatively fast pace of economic growth.

Inflation may be a risk to this benign outlook. Households estimated in December that their cost of living rose at the fastest pace in almost two years. However, expectations for the cost of living remain at low levels and we expect the broader economic slowdown to keep consumer prices anchored.

  • The FTCR China Discretionary Spending Index fell 1.6 points to 76.9 but our Discretionary Spending Outlook Index was up 0.9 points to the same level, the highest since January 2014.
  • Our Household Income Index remained at 79.9, the joint-highest level on record. Our Household Income Outlook Index rose 1.5 points to 80.5, the second-highest level in the history of the series.
  • Our Economic Sentiment Index fell 1.9 points in December to 74.9, but was 11.4 points higher year-on-year. Household views on the economy were also slightly less positive, with our Economic Outlook Index down 1.6 points from November.
  • Respondents estimated their average cost of living rose 8.1 per cent year-on-year, up from 7.3 per cent, marking the fastest increase since February 2015. They expected their cost of living growth to increase 7.3 per cent over the next six months, remaining within the 6-7.5 per cent range seen in 2017.
  • Our House Buying Sentiment Index dropped 0.9 points to 55.9 from last month’s record high, while our Property Investment Index rose back above the 50 mark, gaining 1 point to 50.8. Sentiment towards auto purchases improved while that towards watches and jewellery purchases soured.
  • Our A-share Buying Sentiment Index, measuring whether consumers perceive now to be a good time to invest in A-shares, rose 0.4 points to 49.5, and was 1.5 points higher year-on-year.
  • Actual stock-buying intentions strengthened, with 38 per cent of retail investors saying they plan to buy stocks in the next three months. Consumer sentiment towards purchases of wealth management products and insurance products was about the same, while buying sentiment towards funds was stronger.

The FTCR China Consumer survey is based on interviews with 1,000 consumers nationwide. For further details click here. This report contains the headline figures from the latest consumer survey; the full results are available from our database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.