It is generally believed that permanent income is the basic factor to determine residents’ consumption demand.Based on the annual statistical data of permanent income and consumption expenditure of rural residents in Hubei province from1978 to 2009,this paper analyzes the cointegration of actual permanent income and consumption of rural residents in Hubei province.The result shows that the long-term and short-term consumption elasticity of rural residents in Hubei province is 0.8571 and 0.727 8 respectively,which indicates that relationship between long-term equilibrium and short-term fluctuations exists and permanent income is the decisive factor in affecting consumption demand.Consequently,this paper puts forward corresponding policy suggestion that it is quite necessary to greatly enhance the permanent income of rural residents so as to activate rural consumer market and fundamentally increase the consumption of rural residents.