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Pushing aside recent turmoil in financial markets, Chinese consumer sentiment rose unexpectedly in January.

According to the latest Westpac-MNI consumer sentiment index, confidence rose by 1% to 114.9, taking the index back to levels last seen in September 2015.

Westpac notes that three of the survey’s five subindices improved during the month with the most pronounced increase coming from expectations for personal finances in the year ahead.

This, along with a bounce in sentiment towards business conditions in the five years ahead, helped to offset weaker readings on current personal finances and business conditions in the year ahead.

The breakdown of the surveys internal movements can be found below.

Personal finances – Current 102.1 (-3.4%)

Personal finances – Expected 118.4 (+4.6%)

Business conditions year ahead 112.6 (-1.5%)

Business conditions five years ahead 136.6 (+4.0%)

Durable buying conditions 104.7 (+0.7%)

Reflective of the divergent performance seen in recent months, sentiment towards property market improved while that towards the stock market deteriorated.

Westpac notes that an increasing percentage of respondents reported that real estate was the wisest place to keep their savings, with most suggesting that primary motivation for saving was to purchase property.

As you would expect given the 20% plus plunge in Chinese stocks since the beginning of the year, the surveys stock market expectations gauge, a measure on expectations for prices in the three months ahead, fell heavily.

The chart below, tracking the stock market expectations gauge to movements in the benchmark Shanghai Composite index, reveals that sentiment towards stocks continued to deteriorate, fitting with the theme seen in recent months.

Philip Uglow, chief economist of MNI Indicators, expressed cautious optimism towards the January result.

“Consumers barely blinked during the stock market rout in August 2015, and it was a repeat performance in January with the Westpac MNI CSI pushing higher as markets fell and international concerns about China hit fever pitch once again,” said Uglow.

“The message is that the average respondent to our survey has little direct exposure to the market. Still, the fact that two months after last summer’s crash confidence belatedly fell significantly shouldn’t be ignored with the possibility that the increased negativity on the economy eventually has a more significant impact.”

Essentially, given the delayed reaction in sentiment to the previous stock market plunge between June to August last year, along with further declines in Chinese stocks in recent days, the surprising resilient performance for January may not be replicated in the months ahead.

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