Lunar New Year Sales In Line With Expectations

According to some international observers, the Lunar New Year sales indicate a plunge in Chinese consumption. Economic realities tell a different story.

Chinese Lunar New Year can be seen as a barometer for Chinese private consumption, due to gift-giving and family reunions. Consequently, both holiday data and its international coverage are of great interest.

Here’s the bottom line: During the Lunar New Year holiday in early February, Chinese retail and catering businesses generated a record over 1 trillion yuan ($148 billion). Sales by retail businesses rose 8.5% from a year earlier.

Here’s how the data has been reported internationally: “the slowest increase since at least 2011” (Bloomberg), “Cooler pace of [sales] growth added to evidence the economy is slowing” (Reuters), “China’s lunar new-year spending growth slowest since 2005” (Financial Times).

A dramatic plunge in Lunar New Year sales would indicate that China’s ongoing rebalancing is failing - and yet, that’s not the case.

Shifts in retail sales

One of the key reasons for retail pessimism in international media is that holiday spending appears to have hit profits of foreign high-end companies, such as Apple, Swatch Group and luxury car makers.

But what’s so surprising about that? Good times drive consumer nondurable and durable goods, while uncertainty undercuts the sales of relatively more expensive consumer durables (e.g., cars, appliances, furniture), and over time even cheaper nondurables (e.g., clothing, food, and clothing).

Other observers have lamented that auto purchases are in contraction for the first time in almost three decades. Inevitably, the Trump administration's unilateral tariffs on U.S. car imports are weighing on Chinese consumers. Last year GM’s car sales were down 10%, Ford fell 37%, Tesla had to cut prices for Model 3 in China and Jaguar Land Rover temporarily closed a factory.

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Disclaimer: Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute ...

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