Ozva Admin
Retail sales in China it fell unexpectedly in October 2022 as sales activity in the world’s second-largest economy lost momentum after four straight months of growth.
With China reporting record cases of Covid-19 on November 24, the near-term prospects for a rebound in consumer activity in China seemed highly unlikely. The latest development does not bode well for the global economy given China’s place as the top consumer of raw Materials and energy
In this article, we talk about China’s retail sales, its history and its main drivers, and analyze the forecasts of economic experts.
What are retail sales and how are they measured in China?
Retail sales measure the amount of physical goods and services sold by businesses through stores and online platforms.
This important metric tracks the consumer ask of goods and services and measures the purchasing power of the consumer. Investors look to this data set to gauge the health of the economy.
Retail sales in China are measured and published by the National Bureau of Statistics of China. The data set is published monthly.
According to the China National Bureau of Statisticslegal person enterprises, industrial activity units and self-employed households engaged in commodity retailing activities or providing catering services, which account for the majority of China’s retail industry, are surveyed for the retail sales data set.
Monthly retail sales are expressed in absolute terms and in terms of percentage growth or decrease year-over-year or month-over-month.
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China retail sales history
Historical China Retail Market Data Compiled by an Economic Data Provider commercial economy revealed that retail sales growth in China averaged 12.75% between 1993 and 2022.
More recently, data showed that the retail market in China plunged at the start of the Covid-19 pandemic in early 2020.
YoY growth in retail sales plunged to a record low of -20.5% in January 2020 as China underwent an unexpected and severe lockdown in an attempt to contain the spread of the Covid-19 virus which according to It was reported that it originated in China. Wuhan city in China.
The Chinese economy made a strong recovery in the second half of 2020, as early lockdowns allowed the Asian nation to reopen its economy while the rest of the world was still dealing with devastating waves of Covid-19.
At the beginning of 2021, China’s retail sales registered their highest year-on-year growth in more than 25 years. China’s retail sales growth increased to 34.2% in March 2021 from a low base a year ago.
More recently, Chinese consumer demand has been weak, hit by a debt crisis and bankruptcy in the nation’s real estate sector.
China’s strict zero-covid policy amid sporadic outbreaks of virus infections across the country has hurt the economic recovery in Asia’s biggest economy.
In April 2022, China’s retail sales growth plunged to a two-year low, falling 11.1% from a year earlier after lockdowns in major hubs, including Shanghai and Beijing, brought business to a halt. commercial.
China’s zero covid policy
The National Bureau of Statistics of China reported an unexpected drop of 0.5% in China’s retail sales during the month of October 2022.
The fall in retail sales in China in October ended four consecutive months of sales growth in China.
The data showed that consumer activity was hit especially hard in urban China due to strict Covid restrictions in cities. Retail sales of urban consumer goods fell by 0.6% year-on-year in October. In contrast, retail sales of rural consumer goods increased 0.2% in October.
A study of October retail sales data indicated that Covid-19-related measures are playing a critical role in consumer behavior.
With large events reduced due to restrictions, catering services posted the biggest year-on-year drop in sales at 8.1% in October 2022, of all items.
Meanwhile, household items such as food and beverages posted sales growth in October. Traditional Chinese and Western medicine items registered an 8.9% year-on-year increase in sales in October 2022.
Chinese real estate sector under siege
The very low consumer confidence in Chinese property developers has hurt economic activity in China as much as the strict COVID-19 restrictions.
Real Estate is Crucial to Household Wealth – Real estate is seen by many as the number one asset for wealth. appreciation and conservation. China’s real estate sector, a material-hungry sector, is the world’s largest consumer of steel and cement.
Analysts have He called the Chinese property market a “systemically important” sector. According to Nomura, China’s real estate sector contributed 16.4% to its total gross domestic product (GDP) in 2020, while real estate taxes amounted to 44% of China’s total government revenue.
Chinese property developers are currently reeling under a debt crisis due to a deleveraging cycle initiated by the authorities.
Cash-strapped developers like China Evergrande (3333) have defaulted on loans and been unable to complete residential projects paid for in advance by consumers.
latest data underscored the loss of consumer confidence in the Chinese property market with residential property sales extending their year-on-year decline by 28.2% in October 2022.
Retail sales have suffered greatly due to this development. In October, home appliances and AV equipment experienced the biggest drop of all items with a year-over-year drop of 14%. Sales of furniture and decoration materials for construction fell 6.6% and 8.7%, respectively, in October, compared to a year ago.
China retail sales forecast for 2023 and beyond
“The recent easing of the Covid measures should be positive for retail sales and therefore for some service sectors. Local governments should be able to finish some incomplete housing projects with preferential policies on bank lending to developers.” said Iris Pang, chief economist for Greater China at ING Think, on November 15.
However, on November 24, China reported a record number of Covid-19 infections as authorities imposed nationwide lockdowns and mass testing, according to Reuters.
With the Chinese real estate sector expected to experience a long and arduous cycle towards recovery and deleveraging, the easing of Covid-19 restrictions appears to be the only immediate catalyst for growth in the retail market in China.
JP Morgan analysts said in a November 18 note:
“Recent housing-related measures, including liquidity support for developers and looser regulations on banks with exposure to the real estate sector, reinforce our expectation that the housing market will stabilize next year only after a decline additional significance”.
Meanwhile, IMF First Deputy Managing Director Gita Gopinath I call for the “recalibration” of China’s zero-Covid strategy, which should include “increasing the pace of vaccinations and keeping it at a high level to ensure protection is maintained.”
Elsewhere, Sean Darby, global equity strategist at Jefferies, saw China as a counterpart to its global peers, observing:
“The gradual relaxation of Covid restrictions and support for the real estate sector should mean that China acts as a countercyclical force in 2023, just as the rest of the world tries to avoid recessions.”
Finally, commercial economyas of November 24, China’s retail sales increased 3% year-on-year in 2023.
The bottom line
Forecasting the growth of retail sales in China is a challenging task due to the unknowns of the future. Therefore, it is important to note that analysts and experts can be wrong in their predictions.
Forecasts should not be used as a substitute for your own research. Always perform your own due diligence.
frequent questions
When are China retail sales released?
Retail sales in China are measured and published by the National Bureau of Statistics of China. The data set is published monthly.
Why are retail sales in China falling?
China’s zero covid policy and weak real estate sector are likely to be the main reasons for the decline in retail sales in China.
When will retail sales in China increase?
Near-term Chinese retail activity is dependent on Covid-19 outbreaks and lockdowns. In the medium and long term, consumer confidence in the real estate sector is crucial for the health of the Chinese economy. commercial economy, as of November 24, China’s retail sales increased 3% year-on-year in 2023. Keep in mind that your predictions may be wrong. Forecasts should not be used as a substitute for your own research. Always perform your own due diligence. And never invest money that you cannot afford to lose.
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