China Consumption Monthly Roundup | March 2024 Chartbook

28 March 2024 / Report

Our Monthly Consumption Roundup tracks near-term consumption trends and underlying key drivers for China. Learn more about the key highlights for March.

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Retail sales growth improved in January-February 2024, compared with December 2022-23 average growth (5.5% y-o-y vs 2.8%). Service-related retail sales posted solid growth thanks to heavy spending during the Chinese New Year holidays. However, retail sales growth remains well below 2018-2019 rates, indicating that consumption activity has not fully recovered to its pre-COVID strength. Moreover, improvements in consumer spending may be temporary, given continued weakness in consumer confidence and hiring intentions.
Looking at big-ticket spending, sales of passenger vehicles remained solid in the first two months of 2024, continuing to benefit from ongoing policy support and auto makers’ sales promotions. In the property sector, however, increasing policy support has so far not been successful in arresting the ongoing downturn. Since the beginning of the year, local authorities have accelerated a so-called "whitelist" mechanism to provide funding to struggling developers to ensure the delivery of pre-sold homes. However, this has made no discernible impact so far as key real estate indicators remain in negative territory.
The labor market remains under pressure. Unemployment rates went up across all age groups at the start of this year, suggesting continued downward pressure on the labor market. Moreover, the employment sub-indices of the manufacturing, non-manufacturing, and services PMIs continued contracting in the first two months of the year, further indicating that hiring intentions remain weak.
Looking ahead, the recovery in domestic private consumption will likely extend beyond 2024. Headline consumption growth will no longer benefit from a low base. In addition, without a noticeable recovery in consumer confidence, which depends largely on the stabilization of the property sector and improvements in labor market conditions and income, the outlook for consumption is not promising. Boosting consumption was a key focus in this year’s Government Work Report, but new ideas on how to do so were not forthcoming. The suggested measures – most notably old-for-new programs – may raise consumption at the margins, but are unlikely to have a substantial or lasting effect without healthy growth in income and employment.