Locals more positive, inflation still a worry

‘I believe the government should assess the effect of anti-inflation measures, including the cash handout’, University of Science and Technology economist Liu Cheng Kun said

Local residents are more confident of future prospects for the MSAR economy and the job market but remain worried about high inflation and housing prices, a report released on Friday shows.
In the last quarter of 2011, the Macau Consumer Confidence Index improved 5.2 percent to 86.9 points. The index starts at 0 and goes up to 200 points, which represents the highest confidence.
Despite the improvement the index remained below 90 points, a point it has never reached since the University of Science and Technology (MUST) began this survey, back in 2008.
“Consumers are still not that confident,” Liu Cheng Kun told Macau Daily Times. The mainland Chinese scholar was the coordinator of the project that surveyed 1,107 people last month.
“Economy in mainland China is still growing, inflation is going down and we all know how that has a big influence in Macau,” he recalled. In addition the US economy is recovering, bringing down the number of jobless.
But, on the other hand, “the EU [European Union] debt crisis is deepening, so there is still a lot of uncertainty,” the MUST Faculty of Management and Administration professor stressed.
The index is composed of six factors and five of them recorded a rise in comparison with the third quarter of 2011.

Handout review

The biggest improvement came in the ‘inflation’ rating, which soared 12.3 percent thanks to government measures to try to contain price hikes, said Liu. “Those measures had an impact.”
Yet this factor still got the lowest score, just 57.7 points, as inflation was still at 6.7 percent in November.
“Macau has no monetary policy and as such it is very dependent on mainland China,” the economist recalled. The mainland market has brought good news lately, as Chinese inflation rose just 4.1 percent in December, the slowest pace in more than a year.

However, with big local companies set to increase wages once more, “that may push up inflation,” Liu warned.
Last month Sociedade de Jogos de Macau announced a salary increase of five to 10 percent, as well as a Chinese New Year bonus, and MGM Macau did the same last week.
“I believe the government should assess the effect of anti-inflation measures, including the cash handout,” he said.
Last November the Chief Executive announced that permanent and non-permanent residents would receive a cash handout of MOP 7,000 and 4,200 this year. In May, when announcing a – much smaller – additional handout, Fernando Chui Sai On acknowledged that inflation would get a ‘short-term impact’ of no more than 0.45 percent.

Labour optimism

Local people are particularly confident on ‘employment’, which increased four percent to 119.5 points, and on ‘local economy’, which jumped 7.6 percent to 113.5 points. “Unemployment has remained very low and people are confident it will remain so thanks to future economic development,” the MUST professor said.
In November the unemployment rate dropped to just 2.3 percent, the lowest rate in 15 years, as the local economy continued to soar, up by 21.1 percent, in the first three quarters of 2011.
The only factor that showed a decrease was ‘investment’, which dropped 1.9 percent to 75.6 points. “Most people who invest their money do so in Hong Kong-listed stocks,” Liu stressed.
And the neighbouring stock exchange was not immune to the jitters felt by the world economy last year, he added. In 2011 Hong Kong’s benchmark Hang Seng index lost 19.7 percent.
The MUST survey also shows that age, education and income have a significant impact on consumer optimism. The highest confidence was found among people between 18 and 29 (90.9 to 91.8 points), those who attended or completed university studies (90.9 points) and residents who earn more than MOP 20,000 a month (97.4 points).
On the contrary, consumer confidence drops the most among people who have primary education (81.1 points), who earn less than MOP 10,000 (82.7 to 83.7 points) or are 50 years old or above (83 points).
“Older people start to worry more about retirement,” Liu said, stressing that Macau so far doesn’t have a full social security system.