Chinese consumer still ‘cautious’ despite impressive 6.5 per cent Q4 growth
This morning’s economic numbers showed that the Chinese economy expanded by 6.5 per cent during Q4, with the last three months suggesting that economic activity had more or less returned to normal.
Jeffrey Halley, a senior market analyst, Asia Pacific at OANDA, called China’s industrial production rise of 7.3 per cent “impressive.”
“Made in China showed no signs of slowing down. By contrast, domestic data still showed the caution that has been prevalent throughout the year,” he added.
Unemployment held steady at 5.2 per cent, and this metric will leave Chinese authorities still in their comfort zone, Halley continued.
“All in all, China’s data continues to show that it is and will continue to lead the world out of the pandemic-related recession in 2020. It will lift the rest of Asia with signs of life appearing in Japan,” he observed.
Retail sales modest
December numbers demonstrated that retail sales rose for the fourth month in succession, rising 4.6 per cent, a slight decline from November’s 5 per cent rise, and below expectations.
“For several months now China has been able to avoid a second wave of coronavirus infections, with last week’s December trade data pointing to an economy that appears to have recovered all of its lockdown losses of last year,” commented Michael Hewson, chief market analyst at CMC Markets UK.
“While the headline GDP number looks impressive, it is still clear from consumer spending numbers that the Chinese consumer is still exhibiting some level of caution with retail sales growth still below the levels last seen at the end of 2019, when spending was trending at levels close to 8 per cent,” he observed.
Year on year retail sales declined 3.9 per cent, while the economy grew a very modest 2.3 per cent.
No second wave
The apparent lack of a second wave appears to be prompting Chinese consumers to slowly reopen their purse strings.
“However, we still remain well below the levels seen at the end of 2019, suggesting that Chinese consumers remain cautious when it comes to reopening the purse strings,” Madden said.
He called the the slowdown in retail spending is “a little worrying” which suggests that, for all of this trend of economic improvement, there is some worry given reports of isolated coronavirus outbreaks within China, which are prompting localised lockdowns on a rolling scale.
These clusters of cases have prompted Chinese authorities to build a new 1,500 hospital in the space of five days to cope with a sharp rise in cases, in and around Beijing.
These concerns over a delay to the global recovery have also translated into a mixed start for Asia markets this morning, with the Nikkei 225 lower, with markets here in Europe also look set to open on the back foot, Madden concluded.