'This does not bode well': Chinese retail spending growth in the nation's mega holiday week was the weakest on record

Photo: Feng Li/Getty Images
  • Chinese household spending grew 8.5% during Lunar New Year holidays compared to the same period a year earlier, the weakest increase since at least 2005.
  • Nomura says this “does not bode well for overall retail sales growth” this year.
  • The bank expects Chinese GDP growth will slow further in the first half of this year, especially in the June quarter.
  • It says policymakers are likely to turn to the property market to support economic activity this year.

There’s no shortage of concerns about the Chinese economy right now, especially its manufacturing sector.

You can now add Chinese consumers to the list of worries.

During Lunar New Year holidays in early February, household consumption growth slowed to the lowest level since records began back in 2005, something economists at Nomura say points to lacklustre retail spending this year.

“Retail sales growth during the ‘golden week’ of the lunar new year (LNY) holidays declined further to 8.5% year-on-year this year from 10.2% in 2018, the first instance of single-digit growth since the data were released in 2005,” the bank says.

“LNY holidays are the most important reunion event and also a time for generous spending by Chinese households, so we view retail sales growth during the LNY holidays as a good barometer of private consumption for the year.”


While the slowdown partially reflects a higher base effect following years of strong consumption growth, Nomura says the result this year points to the likelihood of a further deceleration in household spending this year.

“Weak consumption during the LNY holidays in 2019 does not bode well for overall retail sales growth and supports our full-year forecast for retail sales growth to slow to 8.5% in 2019 from 9.0% in 2018,” it says.

“Despite stimulus measures to boost the consumption of autos and electronic home appliances, we believe household consumption will likely be sluggish, given the quick build-up of household debt, the lacklustre income growth outlook amid the economic slowdown and the cooling property sector.”

Nomura expects broader economic growth will slow further in the first half of the year, especially in the June quarter, despite previously announced stimulus measures to free up lending to the private sector and encourage greater household consumption.

In order to support the broader economy, Nomura expects policymakers will likely turn to a tried and trusted part of the Chinese economy to support economic activity in the second half of the year: the property sector.

“We believe Beijing will need to be much bolder in policy easing and see the key to delivering an economic rebound is the deregulation of the property sector in big cities.”

Chinese GDP grew by 6.6% last year, the weakest expansion since 1990.

Earlier this week, China’s Economic Information Daily, a state-run newspaper, said GDP growth could slow further to 6.3% this year.

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