Consumption growth in China is “very likely” to slow further this year as the economy cools, the commerce ministry said on Tuesday, underlining the rising risks facing the Asian giant as it navigates a trade war with the United States.
Chinese authorities have already rolled out a flurry of support measures to temper the effects of the trade dispute on businesses and investment, and are counting on the nation’s vast consumer base to cushion a broader economic slowdown.
“The medium- to long-term accumulated contradictions and risks throughout economic development are going to become more prominent in 2019,” Wang Bin, a commerce ministry official told reporters during a briefing.
“The pressure facing the consumer market will increase and consumption growth is very likely to slow further.”
Wang said softness in retail sales last year, which saw growth averaging 9 percent for the slowest in 15 years, was due to “periodic” weakness in car sales and housing-related spending, though other categories continue to post “relatively normal” growth.
Sales in the world’s biggest auto market shrank for the first time since the 1990s. Japan’s Panasonic Corp last week cut its annual profit outlook after disappointing quarterly earnings it blamed on slowing Chinese demand for auto components and factory equipment.
Retail sales growth during the just concluded Lunar New Year holidays slipped to its lowest since at least 2011, further evidence consumers remain cautious as the economy hits the brakes.
However, Wang cautioned against becoming overly gloomy on the retail sector, saying government policy support measures should cushion the downside.
Indeed, the luxury goods market appeared to have been unscarred by the general slowdown in the retail sector.
Strong Chinese demand helped L’Oreal, Estee Lauder Cos Inc beat sales forecasts in the fourth quarter while the French luxury handbag label Hermes said sales momentum in its Chinese stores stayed strong last quarter.
China’s rich consumers’ appetite for luxury products will remain robust this year, with strong growth in purchasing power among the younger generations, state newspaper China Daily said on Tuesday, citing an industry survey from Ruder Finn and Consumer Search Group.
The official gauge of retail sales only covers spending on physical goods and excludes services. Royal Caribbean Cruises Ltd said it was heading into 2019 with record bookings for cruises and seeing higher demand from Chinese tourists.