Weak China retail sales add to pressure on Beijing to lift economy

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Retail sales in China missed expectations in November, adding to pressure on policymakers after President Xi Jinping signalled last week that he wants to spur household consumption to boost the world’s second-largest economy.

The consumption measure added 3 per cent year-on-year, below a forecast of 4.6 per cent in a Reuters poll, and last month’s rise of 4.8 per cent. Industrial production added 5.4 per cent, slightly above predictions.

The unexpectedly weaker growth comes days after the Communist party leadership called for “vigorous” efforts to boost consumption and domestic demand at the annual Central Economic Work Conference last week.

The November retail number “was the big disappointment of the month, as retail sales . . . came in well softer than both consensus and our forecasts”, said Lynn Song, chief economist for greater China at ING in a research note.

Beijing has struggled to boost confidence against the backdrop of a property slowdown, now entering its fourth year, and bouts of deflation. The government unveiled a series of measures to boost stock markets in late September and to refinance local government debt last month.

Chinese equities fell on Monday. The CSI 300 index of blue-chip mainland-listed companies was down 0.6 per cent by mid-morning, while Hong Kong’s Hang Seng index fell 0.4 per cent.

China’s 10-year sovereign bond yield fell 0.05 percentage points to 1.73 per cent and its 30-year yield fell below 2 per cent for the first time.

The conference’s work report last week listed consumption as the first of nine economic priorities for 2025, ahead of the “new productive forces” that have emerged as a core pillar of Xi’s approach.

The emphasis is one of several signs of growing urgency from the government, including a shift in its monetary policy stance to “moderately loose” from “prudent” for the first time in over a decade last week.

Consumer prices in November rose just 0.2 per cent, a five-month low. Prices have increased every month since January, but growth has remained close to deflationary territory, adding to concerns over the strength of domestic demand.

Consumer spending was an economic concern in China during the Covid-19 pandemic, when the government imposed strict lockdowns to prevent the spread of the virus, and has failed to bounce back fully since a reopening almost two years ago.

ING’s Song said that aside from the National Bureau of Statistics’ property price index for 70 cities, which showed marginal falls during the month and indicated a stabilisation, the overall data was softer than expected in November.

Property investment was still declining, falling 10.4 per cent in the 11 months to the end of November, the NBS said, compared with a fall of 10.3 per cent in the first 10 months.

Goldman Sachs economists attributed the soft retail sales to an earlier than usual start to the annual November “Singles Day” online shopping festival, which pulled forward some sales to October.

But Goldman and other economists said that overall, indicators suggested that annual growth this year would end close to the government’s official target of 5 per cent.

Xi last week pledged to meet the target, saying that China would continue “to play its role as the world’s largest economic growth engine”.

Citi analysts said the government would probably release few details of any proposed fiscal stimulus measures until early next year during the annual meeting of China’s rubber stamp parliament, the National People’s Congress. This normally sets out the economic agenda for the following 12 months.

“The politburo and CEWC concluded with a supportive tone but no major breakthroughs or concrete measures,” Citi said. “The next two months could be a policy vacuum until the NPC.”