Consumption growth in China expected to weaken further this year: China’s commerce ministry

The medium-to-long-term accumulated risks throughout China’s economic development are going to be more prominent this year, said Mr Wang Bin, an official with the country’s commerce ministry at a press briefing on Tuesday. Hence ‘consumption growth is very likely to slow further’, he said.

Mr Wang alluded to the soft retail sales numbers last year, where growth averaged at 9.0%, the slowest pace in 15 years. The subdued sales were due to ‘periodic’ weakness in car sales and housing-related spending, he noted.

However, support from the government should help cushion the downturn faced by the retail sector, Mr Wang said.

A weak auto market, slower iPhone sales

Car sales in China shrank for the first time in two decades for last year. December’s auto sales fell 13.0% in the sixth straight month of decline, bringing annual sales to 28.1 million vehicles, a 2.8% decline from a year earlier.

China’s Association of Automobile Manufacturers is expecting the weakness in car sales to persist for this year, and has forecast flat sales of 28.1 million vehicles.

The country’s retail earnings gained 8.5% during the six-day Chinese New Year holiday period last week, but that growth was the slowest since 2011 when compared to previous years. An increase in shopping was seen for new-year gifts, electronic products, traditional foods, and local specialty products.

A recent report from International Data Corporation (IDC) has shown shipments of Apple iPhones to China down by around 20% for the final quarter of last year due to the slowing economy and the costly price of iPhones.

Apple’s chief executive Tim Cook had blamed a part of the slow sales on the economic slowdown in China.

Chinese authorities have stated that the country has ample room to provide ‘macro policy support’ for its economy.

And yet, a vibrant luxury goods market

Even as a slowdown is seen in the retail sector, the luxury goods market is much less affected by the downturn. Some luxury items companies have reported robust sales in the Chinese market.

French luxury handbag brand Hermes reported strong sales momentum in its Chinese stores in the fourth quarter. Luxury bag player Louis Vuitton recently stressed that sales were picking up in the country.

According to a report published in November by global consultancy firm Bain and Company, China is expected to account for the lion’s share of growth for the global luxury goods market in 2018. In the Chinese market, luxury sales for last year grew 18.0% at current exchange rates to €23.0 billion (¥175.7 billion), driven by rising demand rather than by price increases, the report said.