China consumers less willing to spend in Q1 -Nielsen

BEIJING Wed May 16, 2012 10:57pm EDT

BEIJING May 16 (Reuters) - China's consumers are cooling towards discretionary spending, preferring to salt money into savings or education for their children, according to a Nielsen survey of Chinese consumer confidence published on Thursday.

Although Nielsen found that Chinese consumer confidence rose in the first three months of 2012 to its highest since 2005, making China the world's fourth most optimistic nation, willingness to spend remained flat.

Savings and education were the only areas in which survey respondents were more willing to allocate additional cash.

Willingness to spend on clothes, food, entertainment and holidays all dropped compared with the previous quarter, although higher than the first quarter of last year.

Recently released official data for April also showed a slowdown in China's retail sales growth to 14.1 percent, the lowest in 14 months and well below economists' expectations, hit by a prolonged credit crunch in the property sector and flagging demand from export markets.

Nielsen's previous quarterly survey had found that Chinese consumers expected inflation to continue to stabilise in 2012.

Inflation in April eased to 3.4 percent year on year, from a three-year peak of 6.5 percent in July 2011, according to government data.

The latest Nielsen survey showed consumer confidence rose the most in rural areas where remittances from migrant workers are helping to boost spending power.

By contrast, confidence in China's wealthiest cities, provincial centres and county seats remained flat. Only the second-tier cities - which generally include the regional economic centres - saw an uptick in confidence.

Urban consumers' outlook for China's overall economic state was either flat or down compared with the previous quarter. Only among rural consumers did the outlook tick up.

Nielsen, which provides data on consumers' spending and viewing habits worldwide, surveyed 3,500 Chinese people from a range of backgrounds.

Sales of quick-turnover consumer goods such as food and personal care and hygiene products are rising at a faster rate in rural areas, Nielsen found, as incomes rise and local markets stock more goods.

But rural consumers only spend an average of 418 yuan ($66.16) a month on discretionary items, often during day trips to larger towns with shops and markets, compared with average monthly spending of 1,617 yuan a month by urban consumers. ($1 = 6.3182 Chinese yuan) (Reporting By Lucy Hornby)