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The slowdown in China’s retail sales may be due to the local equity slump and increasing mortgage burden, which has dampened consumer confidence. It is important to note that retail sales data do not represent total household consumption in China, according to the latest report from ANZ Research.
If online services spending is included, China’s retail sales growth is approximately 1-2ppt higher. Domestic consumption is a key pillar to sustain China’s growth amid the trade war. A 3-4ppt contribution from private consumption is needed to ensure GDP growth of 6.5 percent y/y in 2018.
This may require about 10 percent y/y increase in retail sales. A solid momentum for services consumption will help offset sluggish retail sales.
In addition, the rising popularity of some mobile phone apps suggest more Chinese consumers, even those in first-tier cities, are willing to buy products online at lower prices. This seems to suggest that China’s transition from investment to consumption-driven economy may be slow, the report added.
