Trusted Insights for What’s Ahead
Growth in retail sales slowed to 3.0% y-o-y in November, down from 4.8% in October.
- In November, retail sales growth slowed to 3.0% year-on-year, down from 4.8% in October. The dip was driven by a high comparison base (10.1% growth in November 2023) and the early start of this year's "Singles Day" festival in mid-October. However, the consumer trade-in program boosted sales of cars and white goods.
- At the recent Central Economic Work Conference (CEWC), China’s top leadership decided to intensify stimulus measures in 2025, with the number one task being the expansion of demand – and, especially, consumer spending. We anticipate that the consumer trade-in program, along with other favorable policies, will be extended into next year, which should support retail sales to some extent. However, achieving more sustainable growth will necessitate the implementation of structural reforms aimed at enhancing consumer confidence, and this will take time – our analysis of the key takeaways of the CEWC is available here.
Sales of new energy vehicles (NEVs) continued to surpass sales of traditional cars due to strong policy support, a trend we expect to continue next year to support GDP growth and offset some of the impact of import tariffs in Europe.
- Sales of NEVs increased by 50.5% y-o-y in November, accounting for 52.3% of total car sales. This was driven by strong government support, low prices, and sluggish sales of internal combustion engine (ICE) cars – i.e. 0.4% y-o-y sales growth.
- In August, the government doubled auto trade-in subsidies from RMB 10,000 to RMB 20,000 (about $2,700) for NEVs, and from RMB 7,000 to RMB 15,000 for traditional cars. We expect this, together with the year-end promotion, to help drive car sales for the rest of the year, especially for NEVs.
Because of weak consumer confidence and household reluctance to take on debt, the property sector will continue facing difficulties despite government support.
- While the property sales and price data have improved in recent months, it is still too early to take this as a signal that the property sector is close to bottoming out given persistent consumer confidence weakness and high unsold residential inventory.
- China’s top leadership reaffirmed its commitment to stabilizing the property sector at the recently held CEWC. We expect to see more fiscal and monetary support aimed at boosting housing sales and converting unsold inventory into social housing units. But, whether these measures will be sufficient to stop the property market decline remains to be seen.
While China's headline unemployment rate remains stable, the Purchasing Managers’ Index (PMI) employment subindices indicate ongoing job-market weakness. We expect labor market weakness to continue weighing on household income and consumption.
- The discrepancy is largely attributed to the National Bureau of Statistics' loose definition of employment, which considers anyone working over an hour per week as being employed. The continued contraction in the PMI employment subindices paints a gloomy picture of the labor market.
While consumer spending is poised to benefit from more intense government support measures in 2025, the effectiveness and sustainability of these measures will be limited by the persistent weakness of confidence levels.
- The expansion of domestic demand emerged as the top priority for the government’s economic work next year at the recent CEWC. A decision was also made to intensify fiscal and monetary stimulus. We therefore expect to see more government support to boost consumer spending, and this will likely be reflected in better growth levels in sales of goods and services. This said, the effectiveness and sustainability of these support measures will be limited due to persistent consumer confidence weakness.
- Some of the actions listed in the readout of the recent CEWC are aimed at improving confidence, e.g. raising income levels, increasing pensions for retirees, and reducing the financial burden of households. Yet, as we explain in our analysis of the CEWC, not only were there no details provided on how the government will achieve these tasks, but it is also very likely that improving confidence levels will be a protracted process. In order to unblock the potential of domestic demand, it is imperative to implement structural reforms aimed at reducing precautionary savings and building an enabling environment for a thriving private sector.
Trusted Insights for What’s Ahead
Growth in retail sales slowed to 3.0% y-o-y in November, down from 4.8% in October.
- In November, retail sales growth slowed to 3.0% year-on-year, down from 4.8% in October. The dip was driven by a high comparison base (10.1% growth in November 2023) and the early start of this year's "Singles Day" festival in mid-October. However, the consumer trade-in program boosted sales of cars and white goods.
- At the recent Central Economic Work Conference (CEWC), China’s top leadership decided to intensify stimulus measures in 2025, with the number one task being the expansion of demand – and, especially, consumer spending. We anticipate that the consumer trade-in program, along with other favorable policies, will be extended into next year, which should support retail sales to some extent. However, achieving more sustainable growth will necessitate the implementation of structural reforms aimed at enhancing consumer confidence, and this will take time – our analysis of the key takeaways of the CEWC is available here.
Sales of new energy vehicles (NEVs) continued to surpass sales of traditional cars due to strong policy support, a trend we expect to continue next year to support GDP growth and offset some of the impact of import tariffs in Europe.
- Sales of NEVs increased by 50.5% y-o-y in November, accounting for 52.3% of total car sales. This was driven by strong government support, low prices, and sluggish sales of internal combustion engine (ICE) cars – i.e. 0.4% y-o-y sales growth.
- In August, the government doubled auto trade-in subsidies from RMB 10,000 to RMB 20,000 (about $2,700) for NEVs, and from RMB 7,000 to RMB 15,000 for traditional cars. We expect this, together with the year-end promotion, to help drive car sales for the rest of the year, especially for NEVs.
Because of weak consumer confidence and household reluctance to take on debt, the property sector will continue facing difficulties despite government support.
- While the property sales and price data have improved in recent months, it is still too early to take this as a signal that the property sector is close to bottoming out given persistent consumer confidence weakness and high unsold residential inventory.
- China’s top leadership reaffirmed its commitment to stabilizing the property sector at the recently held CEWC. We expect to see more fiscal and monetary support aimed at boosting housing sales and converting unsold inventory into social housing units. But, whether these measures will be sufficient to stop the property market decline remains to be seen.
While China's headline unemployment rate remains stable, the Purchasing Managers’ Index (PMI) employment subindices indicate ongoing job-market weakness. We expect labor market weakness to continue weighing on household income and consumption.
- The discrepancy is largely attributed to the National Bureau of Statistics' loose definition of employment, which considers anyone working over an hour per week as being employed. The continued contraction in the PMI employment subindices paints a gloomy picture of the labor market.
While consumer spending is poised to benefit from more intense government support measures in 2025, the effectiveness and sustainability of these measures will be limited by the persistent weakness of confidence levels.
- The expansion of domestic demand emerged as the top priority for the government’s economic work next year at the recent CEWC. A decision was also made to intensify fiscal and monetary stimulus. We therefore expect to see more government support to boost consumer spending, and this will likely be reflected in better growth levels in sales of goods and services. This said, the effectiveness and sustainability of these support measures will be limited due to persistent consumer confidence weakness.
- Some of the actions listed in the readout of the recent CEWC are aimed at improving confidence, e.g. raising income levels, increasing pensions for retirees, and reducing the financial burden of households. Yet, as we explain in our analysis of the CEWC, not only were there no details provided on how the government will achieve these tasks, but it is also very likely that improving confidence levels will be a protracted process. In order to unblock the potential of domestic demand, it is imperative to implement structural reforms aimed at reducing precautionary savings and building an enabling environment for a thriving private sector.
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