China's Consumers Aren't Shopping Like Their Economy Is Doomed For A Hard Landing
National retail sales and catering grew 13.3% year over year in the first week of the new year which began January 31, according to the ministry of Commerce.
This was below the 14.7% YoY reading in the Lunar New Year Golden Week holiday in 2013, but Bank of America's Ting Lu doesn't think this reflects a slowdown in consumption growth.
"In 2014 the LNY Golden Week started from the first day of LNY, while in 2013 it spanned from the Lunar Year Eve," Ting writes. "Since regardless if it's holiday or not, people make big purchases and dine out on the Lunar Year Eve, the new LNY holiday schedule could have a material impact on yoy reading in LNY holiday spending."
Online shopping, catering, tourism, and entertainment all saw strong demand. The crackdown on corruption saw luxury gifts like expensive alcoholic beverages, cigarettes and rare seafood fall sharply.
In Fuzhou city, sales of high-end alcoholic drinks fell 70% on the year, seafood gift sets fell 50%.
"A similar picture of low-end and high-end differentiation can also be found in the catering business," Ting writes. "For instance, mass market restaurants in Anhui, Liaoning, Hubei and Hunan provinces saw a revenue growth of 20%, while high-end restaurants in Helongjiang province recorded a 20% drop in revenue."
We also saw a jump in tourism. Tourism revenue was up 16.4% YoY, and overseas group trips climbed to 4.73 million during the golden week, up 18.1% on the year.
"The holiday spending data support our view that growth in China will be relatively stable despite a new round of worries on hard landing," writes Ting.
This chart from Barclays shows a rise in retail sales growth this Lunar New Year:
Barclays