China Center Chart of the Week: Do weak retail sales over the Chinese New Year holiday signal slowing consumption growth?

This China Center members-only chart assesses the “real” (i.e. inflation adjusted to 2012 price levels) monthly Retail Sales of Consumer Goods statistic over the last 5 years, emphasizing the sales for Chinese New Year (CNY) holiday periods.

Recent press reports lamenting weak CNY sales (anecdotally blamed on current Government austerity measures associated with banqueting and gift giving, etc.), and the negative connotations therein for China’s consumption growth trends, require some scrutiny. The real story is unfortunately quite unclear.

To account for price increases over the last 5 years, and thus produce a “real” estimation, we deflated the reported nominal statistical data by the Retail Price Index (RPI). The analysis shows that year-on-year growth for this year’s CNY holiday was 12 percent – 2 percentage points lower than CNY-week year-on-year growth in 2011 and 2012.

Does this signal that consumption growth is slowing? Download the Chart for a full exploration of this question.