Iris Pang, economist at ING, notes that the Chinese retail sales boomed by 9.8% YoY in June from 8.6% YoY. This number looks encouraging.
“The details tell a different story.
- There are signs that Chinese consumers have become more cautious about spending on leisure trips, signalling that consumers are potentially concerned about their job security and wage growth. Consumer items typically bought on overseas' leisure trips have been bought domestically. We expect retail sales in China will continue to grow at a good rate even that growth is coming for all the wrong reasons.
- Another reason for the jump in retail sales in June was that China's car dealers cut prices, which boosted car sales 17.2% YoY after sales growth of just 1.2% YoY YTD. But the price cutting promotion can't last for more than a quarter. And together with shrinking production (by 16.8%YoY in June), corporate earnings of car dealers and car producers will suffer.”
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