China’s monthly consumption growth rate for April hit a new low since May 2003. However, this seasonal decline does not indicate a downtrend, Dr Guo Qiang with a major Chinese commercial bank wrote in a commentary for news portal jiemian.com.
According to the National Bureau of Statistics, retail sales volumes in April reached 30.58 trillion yuan (US$4.42t), an increase of 7.2 percent, down from the 8.7 percent registered in March.
Although the market growth is slowing overall, such a rapid decline in consumption has exceeded expectations, Guo said.
One of reasons is the extended Labor Day holiday, which falls on and around May 1. Last year, two of the three holiday days landed in April. However, this year’s holidays were all in May, contributing to the decline in April’s consumption over the same period last year.
Comparing data over the past 10 years, Guo found that a dip in consumption growth rate in April was the norm - 2013, 2010 and 2009 were exceptions. Guo believes these data reveals that a decline in April is a seasonal fluctuation.
Consumption mainly depends on consumer demand and disposable incomes. In 2018, per capita disposable income for Chinese was 28,228 yuan (US$4,080), an increase of 8.7 percent year-on-year, while per capita spending was 19,853 yuan (US$2,869), an increase of 8.4 percent compared with the previous year. These statistics show that between 2016 and 2018, consumer willingness and buying power remained stable at around 71 percent, Guo added.
As housing prices skyrocketed over the past decade, mortgage payments occupied a larger proportion of monthly expenses, which squeezed other areas of consumption. But over the past two years, the growth rate of real estate prices has weakened, and spending in other areas may gradually increase if income growth remains stable.
Judging from the April data, there is no cause for pessimism, and the seasonal decline in consumption does not show a downward trend, Guo wrote, adding that consumption may have already hit its low point thanks to the promotion of tax and fee cuts. Consumption is more effective with policy guidance, and finding a reasonable stimulus point for people to expand consumption without doubt should be addressed at the decision-making level, Guo said.
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