China retail sales slow as consumers hold back, while home prices fall

Christmas decorations at a popular mall in Beijing

Chinese retail sales slowed in November and housing prices fell, the government said yesterday, with demand still lackluster despite a flurry of stimulus measures over the past few months.

The report came just a few days after top leaders ended an annual planning meeting in Beijing that produced no major new policy initiatives but included promises to do more to encourage people and businesses to spend more more. Analysts said ruling Communist Party leaders were leaving room to do more if U.S. President-elect Donald Trump delivers on his promises to raise tariffs on imports from China once he takes office.

The National Bureau of Statistics reported that the economy was stable, with the unemployment remaining at 5%.

“However, we must also see that the external environment is more complicated, domestic demand is insufficient, some enterprises are facing difficulties in production and operation, and the foundation for the sustained recovery of the economy still needs to be consolidated,” Fu Linghui, a spokesperson for the National Bureau of Statistics, told reporters.

Retail sales rose 3% from a year earlier, down from October’s 4.8% increase and below the 3.5% annual rate in January-November.

Consumers held back on spending on non-essentials like cosmetics, alcohol and clothing, though purchases of appliances and vehicles surged thanks to a government program to pay subsidies to entice people to replace older appliances and cars with newer, energy efficient versions and electric vehicles.

Auto sales rose 6.6% in November over a year earlier, but have fallen 0.7% year-on-year so far this year. Sales of appliances jumped more than 22%, and have climbed 9.6% so far this year.

The cash-for-clunkers and appliance recycling programs have helped keep factories humming, as has President Xi Jinping’s emphasis on building up high-tech industries for “high-quality” development. That has supported manufacturing: growth in factory output ticked up to 5.4% year-on-year from 5.3% in October.

Chinese leaders pledged to take a more proactive approach in pepping up the economy after their two-day planning meeting last week, but gave no details on stimulus measures.

Also yesterday, the government announced a plan to upgrade the entire retail system in the coming five years, saying projects to revamp retail outlets would be rolled out across the country, providing “business landmarks” including shopping, food and entertainment venues.

The plans as outlined in state media make no mention of the key factors that economists say are leading many Chinese families to scrimp and save rather than spend: insecurity about jobs, weaker prices for property and other assets and low incomes.

“Ultimately, consumption will be driven by income growth and the propensity to save,” Oxford Economics said in a report. “The outlook for the former is cautious and savings are being driven by concerns about the economic outlook.”

Investment in fixed assets like factories and in housing construction slowed in November. Property prices fell and home sales also declined in most cities, the statistics bureau said, as China endures a downturn in its real estate market after regulators cracked down on excessive borrowing by developers that plunged the whole industry into crisis.

The disruptions to jobs and businesses during the COVID-19 pandemic have further weighed on the world’s second-largest economy.

“China’s economy appears to have slowed last month, despite tailwinds from recent policy easing,” Julian Evans-Pritchard of Capital Economics said in a report. “Growth still looks on course to pick up this quarter, but the disappointing November data underscores the challenge policymakers face in engineering a sustained rebound in growth.”

Chinese stocks had climbed recently on renewed hopes for a stronger dose of stimulus to help counter the weak consumer sentiment that has kept the economy growing this year at a rate slightly slower than the government’s official target of about 5%.

Yesterday, Hong Kong’s Hang Seng index fell 1% while the Shanghai Composite index slipped 0.2%. The Hang Seng property index fell 1.3%.

Evans-Pritchard said the impacts of a raft of policies to ease credit and support the economy would likely pick up in coming months.

“But we doubt that stimulus can deliver anything more than a short-lived improvement, not least because the current strength of export demand is unlikely to last once President Trump starts to put some of his tariff threats into action.” ELAINE KURTENBACH, BANGKOK, MDT/AP