August 1, 2012 / 7:06 AM / 6 years ago

China big city spenders confound global gloom: survey

BEIJING (Reuters) - Consumer optimism in China’s biggest cities rose to its highest in nearly three years in the second quarter of 2012 even as global economic gloom knocked the national average down from a more than six-year high, a survey showed on Wednesday.

The rise in confidence among consumers in China’s so-called Tier 1 cities was fuelled by a combination of improving job prospects, better personal finances and a greater willingness to spend, said the survey by global information company, Nielsen.

The Tier 1 city consumer confidence index was the only one of five regional sub-indexes to rise quarter-on-quarter, but the bounce to 107 from 101 in the first three months of the year still left China’s big city sophisticates lagging their rural cousins according to the quarterly survey of 3,500 consumers.

Rural consumers remained the most optimistic - they have been since the first quarter of 2011 - despite the regional confidence index registering a six-point quarterly drop to 113.

Growth in the world’s second-largest economy was fuelled by strong domestic spending in the first half of the year, and China has said it is a top priority to boost consumption as a means of adjusting its economic structure.

China’s cities are divided into tiers for administrative purposes. Tier 1 comprises China’s four biggest cities, Tier 2 the key provincial capitals, with Tiers 3 and 4 established by population size and economic output. Rural areas are separate.

Rural consumers had the highest confidence level on employment prospects, with 92 percent saying the jobs outlook was excellent or good, unchanged from the first quarter survey.

Tier 1 consumers were next most optimistic about jobs - and again the only group registering a quarter-on-quarter improvement - with 59 percent describing job prospects over the next 12 months as excellent or good.

Tier 1 consumers were particularly upbeat about service sector job opportunities - vital to Beijing’s plan to rebalance an economy mainly focused on manufacturing and investment.

China’s consumers on average remain among the most optimistic internationally.

While the headline China index dropped to its lowest since the third quarter of 2011, the reading of 105 was still 14 points above the world average in the Nielsen global survey of consumer confidence and spending intentions that polled more than 28,000 consumers in 56 countries.

TIER 2 TURNS DOWN

But consumers in Tier 2, Tier 3 and Tier 4 cities all cited a reduction in job prospects for the coming year - the sub-index for Tier 2 sank 14 points to at least a four-quarter low.

China’s overall labor market, however, remains tight with official figures showing more job vacancies nationwide than there have been for around a decade, despite six straight quarters of slowing growth and an export downturn that is biting into the vast manufacturing sector.

Tier 2 consumers also suffered the sharpest drop in confidence about the health of their personal finances.

A slowing economy and reduced job prospects were cited as souring outlooks to leave only 58 percent of respondents seeing excellent and good prospects in the year ahead, down 13 points on the quarter.

China’s top leaders said on Tuesday they would enhance pro-growth policies in the second half of the year, although there are signs of stabilization in the economy.

The overall decline in consumer confidence unsurprisingly pushed down the national willingness to spend in China to its lowest in three quarters, though Tier 1 consumers again bucked the trend with a fourth straight quarter of improvement.

The survey showed that consumers aged 30-39 were more willing to spend than those below 30 for the first time since the last quarter of 2011.

Digital appliances, home appliances and furniture top shopping lists for both demographics. Some 44 percent of Chinese consumers under 30 plan to buy digital appliances versus 35 percent of those aged 30-39.

The annual rate of retail sales growth in China has slowed in recent months, but remains firmly in double digits.

Domestic consumption was revealed to be the biggest driver of economic output in the first half of 2012 when data was published last month, contributing 4.5 percentage points to the overall rate of 7.6 percent. Capital spending added 3.9 percentage points and exports were a 0.6 percentage point drag.

Editing by Jacqueline Wong

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