In a recent report by the National Bureau of Statistics (NBS), retail sales in China for July rose by 2.7% year-over-year. This figure, while an improvement over the 2% recorded in June, remains below the 3.5% growth rate observed during the first seven months of 2024. Notably, during pre-pandemic years, China’s retail sales consistently grew by nearly 10% on an annual basis, highlighting a significant shift in consumer spending patterns in recent years. As the pandemic years of 2020 to 2023 brought about fluctuations in retail sales, a degree of stabilization has been seen in 2024.
However, after achieving a 5.5% gain in the initial two months of the year, the rate of growth has since tapered to a range between 2% and 3% year-over-year. Market analysts at brokerage house Jefferies have expressed cautious sentiments regarding the retail outlook in China. In a letter to their clients, they emphasized the macroeconomic weaknesses and the challenges faced by key retail firms with substantial market shares.
This suggests that despite nominal growth, the underlying issues within the economy may hinder more robust sales increases in the future. Examining retail performance by category reveals interesting trends. The most notable growth was seen in sectors such as beverages, which surged by 6.1%, sports and recreation articles, climbing 10.7%, and communication equipment, which saw a remarkable 12.7% increase year-over-year.
On the flip side, certain sectors faced declines: tobacco and alcohol dipped by 0.1%, furniture sales fell by 1.1%, apparel dropped by 5.2%, and cosmetics shrank by 6.1%. Interestingly, the online retail sector remains a bright spot, with a year-over-year increase of 7.9% in July. This underlines the ongoing shift towards e-commerce as consumers adapt their shopping habits in the post-pandemic landscape. Despite the improvement from June's growth figures, the overall sentiment regarding China’s retail sales remains sluggish.
Analysts at Macquarie, an Australian financial house, stated that July's 2.7% increase, while better than June’s, still reflects a very slow growth rate. They further highlighted that auto sales have become a significant drag on this sector, plummeting by 5% year-over-year. In the food sector, restaurant revenue experienced a growth of merely 3% year-over-year, which Macquarie noted as the slowest growth rate since the country reopened post-pandemic. Given the persistently sluggish retail sales and struggles within the Chinese property market, there are growing expectations that Beijing may implement some form of macroeconomic stimulus in the latter half of 2024.
This adjustment might be necessary to stimulate consumer spending and bolster economic recovery..