In a sign that Chinese consumer sentiment has improved, there was a resurgence in travel over China’s Lunar New Year holiday. According to official reports, more than 61 million rail trips were made on the first six days of the national New Year holiday, a +61% increase in the same vacation period in 2023 and the highest in data compiled by Bloomberg News in the last five years. The main question is, will the pickup in consumer spending point to a sustainable improvement in the Chinese economy?
According to state media reports citing the Ministry of Finance, hotel sales on Chinese e-commerce platforms surged more than 60% from a year earlier. However, some analysts remain concerned that this year’s increase in holiday travel cannot be counted on as an early indication of economic improvement. HSBC Holdings Plc said even though spending by Chinese consumers exceeded expectations, surpassing 2023 was a “low bar” given the country was still contending with a rampant outbreak of COVID-19 at the time.
The news of increased travel and spending is a positive for the Chinese economy, which is struggling with growth this year as the ongoing property crisis dents confidence and deflationary pressures persist. Consumer prices in China dropped -0.8% y/y in January, the weakest since 2009, adding pressure on the government to increase stimulus measures to boost the economy. According to state broadcaster China Central Television, Shanghai reported some 8.8 million tourists just ahead of the Lunar New Year holidays, up +50% y/y.
There are signs that Chinese consumers boosted their spending during the New Year holidays. Online platform delivery company Meituan reported that the average daily consumer spending on its online platforms jumped +36% from the same period last year. Meituan didn’t give the actual value of consumption but said it exceeded pre-Covid levels in 2019. There was also strong growth in restaurant spending in the first five days of the Chinese New Year holidays, with overall order volume from groups surging by +161% from last year.
Consumer confidence in China has been waning recently due to its ongoing property crisis and slumping stock market. The slide in consumer confidence has also undercut sales of big-ticket items. According to the China Association of Automobile Manufacturers, Chinese passenger car sales fell by 26% in January compared to December. Gary Ng, senior economist at Natixis SA, said it remains to be seen if the increase in consumer spending over the new year holiday is sustainable, saying, “It is uncertain if this can fully offset the consumption shift away from durable goods, and the downgrade trend for some residents.”
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
