Consumer confidence in city's economy drops to year's low

08:55, January 12, 2011      

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Consumer confidence in Shanghai's economy declined to a year's low in the fourth quarter of 2010 on rising inflationary pressure, possible yuan appreciation and stubbornly high housing prices, a survey showed yesterday.

The Shanghai Consumer Confidence Index fell to 102.3 points between October and December, down 4.4 points from a quarter earlier and 13.6 points lower a year ago, according to the quarterly survey by the Shanghai University of Finance and Economics.

An index reading above 100 points signals consumers are positive about the economy while one below that implies the opposite. The index headed south after it peaked in the fourth quarter in 2009 as inflationary risks, surging home prices and rapid economic growth dampened consumer confidence.

"Although in the industrial sector, exports and consumption are growing soundly, consumers are more cautious because a yuan appreciation, expectations of inflation and inflows of hot money may hamper sustainable economic development," said Xu Guoxiang, the research program leader and director of the university's Applied Statistics Research Center.

The city's Consumer Price Index, a major gauge of inflation, rose 4.3 percent in November and pushed prices in the first 11 months to 3 percent. Home prices in the city are showing signs of recovery because property is often seen as a safe haven against inflation.

Prices of new and existing homes in Shanghai climbed 2.3 percent and 4.4 percent in November from a year earlier, according the National Bureau of Statistics. The average price of new apartments was 21,278 yuan per square meter in November, the highest in the city so far.

Around 70 percent of the respondents said interest rates will rise again within six months, compared with 41 percent three months earlier.

Source: Shanghai Daily
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