Chinese Consumers Expected to Remain Cautious Ahead

While recent data suggest that China’s consumption slump may have bottomed, consumer confidence remains very weak. Weak domestic demand, COVID-19 restrictions, and the global economic slowdown will continue to drag on Chinese consumption, both online and offline.

In-person consumer services will remain hamstrung by recurring COVID flare-ups and thus continue to drag broadly on overall consumption. A near-term recovery to pre-COVID growth levels is unlikely, unless “dynamic Zero-COVID” containment measures are lifted.

We expect inflation to continue climbing moderately in the coming months. While it remains within the government’s target, persistently volatile fuel and food prices will further dampen consumer sentiment.

Going forward, we expect Chinese consumers to remain cautious about spending on nonessential items and increase their savings in the face of growing uncertainty about the economy.

For more analysis, please see our China Consumption Outlook (Q3 2022) 

Chart: Consumer Confidence Index (100+=optimistic)