China Consumption Monthly Roundup | January 2024 Chartbook

04 February 2024 / Report

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

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Retail sales growth moderated in December (7.4% y-o-y vs 10.1% in November). While part of this slowdown was due to favorable base effects fading, quarterly data also show that the overall growth momentum in consumption moderated in Q4. This is consistent with the continued weakness in consumer confidence and slow growth in household income.
Headline growth figures makes retails sales look deceptively strong in 2023. Last year retail sales grew 7.2% y-o-y, but this was largely due to 2022’s very low base (which actually contracted 0.2% compared to 2021). Looking at the 2022-23 average growth to control for base effects, it is clear that the recovery in domestic consumption remains a protracted process: on average, retail sales grew 3.5% in 2022-23, compared with 8.4% in 2018-19.
Both household income and spending growth slowed in Q4. Averaging for Q4 2022 and Q4 2023, household income grew 5.3% and household spending 3.3%, respectively down from 6.2% and 8.2% in Q3 (2022-23 average). Overall, household income and spending growth in 2023 remained well below pre-COVID levels. That household spending growth is significantly lower than income growth is reflective of consumers' low propensity to spend.
The labor market remains under pressure. The newly released adjusted youth unemployment rate (people aged 16-24 years, but excluding currently enrolled students) stood at 14.9% in December, still much higher than the 5.1% headline unemployment rate. Moreover, the employment sub-indices of the manufacturing, non-manufacturing, and services PMIs continued to contract in December, indicating that hiring intentions remain weak.
Looking at big-ticket spending, sales of passenger vehicles grew robustly in December and reached record numbers in 2023, benefiting from ongoing policy support and auto makers’ sales promotions. Increasing policy support was not enough to help the property sector to bottom out from its current downturn, with most key real estate indicators still in negative territory.
Looking ahead, the recovery in domestic private consumption will remain a protracted process in 2024. Not only will headline growth data no longer benefit from a low base, but without a noticeable recovery in consumer confidence, itself dependent on a stabilization of the property sector and on improvements in labor market conditions and income increases, there is little reason to expect strong consumption growth in the coming months. We do expect both monetary and fiscal policy to be accommodative in 2024, including the recent required reserve ratio cut, possible interest rates cuts, and additional special government bonds insurance. However, we have so far not seen any concrete indication of demand-side stimulus measures that could directly boost household consumption.