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29 April 2024 / Report
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Copy LinkRetail sales growth slowed to 3.1% year-on-year in March, down from the 5.5% increase seen in January- February. Despite the moderation in March driven by last year’s high base of comparison and the fading of pent-up demand released over the Lunar New Year holidays, growth in retail sales of services remained largely robust. However, with the comparison base from last year continuing to escalate, there's a possibility growth might slide further in the months ahead.
Looking at big-ticket spending, the volume of passenger vehicles sold remained robust in Q1, thanks to ongoing policy support and aggressive price cuts by car companies. Policy support has, however, not had any discernible positive impact on the property sector so far, as key real estate indicators remain in deeply negative growth territory.
The labor market remains under pressure. Despite marginal improvement in the March headline unemployment rate, youth unemployment (aged 16-24) remained high and unemployment amongst Chinese aged 25–29 years old picked up. Moreover, the employment subindices for the manufacturing, non-manufacturing, service, and construction PMIs continued contracting in March, indicating that hiring intentions remain weak.
Looking ahead, the recovery in domestic private consumption will continue, but amidst significant headwinds. Q1 data indicate that consumption decelerated in March, and we expect downward pressures on growth to persist over the coming months because of the ongoing weakness in consumer confidence, weak hiring intentions, and slow growth in household income. Policy measures are not having a significant impact either. It has been a month since the plan to stimulate demand by establishing an old-for-new trading program aimed at upgrading the country’s stock of industrial and household equipment was announced; but concrete implementation measures are still missing. Moreover, this program is unlikely to have a substantial or lasting effect on consumption without healthy growth in income and employment.
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