Because of the government's subsidy programs, low-income groups which used to have lower confidence are now closer to the national average, with their confidence up 12 percentage points from the previous quarter, the report said.

Ha Jiming, chief economist of China International Capital Corporation, said better infrastructure in rural areas will largely boost consumption.

Despite rising consumer confidence, people's willingness to spend has decreased. The report showed that 43 percent of consumers think now is a good time to spend, down 3 percentage points from the previous quarter.

"One hypothesis is that consumers are concerned about price increases, especially for real estate. If you are saving to buy a property, and housing prices are increasing faster than income, it logically motivates people to save more and spend less. Concern over healthcare policies and costs also contribute to this picture," said Barns.

Property prices in 70 major cities rose 11.7 percent in March, the biggest year-on-year rise since July 2005.

"We expect consumer confidence to be stable or rise next quarter, and job prospects will continue to be favorable. The thing to watch is price inflation, especially for high visibility items like housing," said Barns.

The report showed that income is consumers' top concern, unchanged from the previous quarter's finding.

It is followed by health and children's education.