China Retail Sales: September 2021

In September 2021, China’s total retail sales growth (excluding food service, including automobiles and gasoline) increased by 4.5% year over year. While this is a slight acceleration from a slow August, the persistent single-digit growth in the last three months indicates that recovery is losing momentum. The National Bureau of Statistics attributed the slowdown to the impact of sporadic local Covid-19 outbreaks. The number of coronavirus cases in China is low compared to other countries. However, we anticipate that retail sales will continue to grow by single digits in the coming months as momentum in China has slowed. China’s zero-tolerance approach to Covid-19 infections coupled with supply chain bottlenecks pose headwinds to future retail growth. Looking ahead to October’s numbers, a further year-over-year decline in tourism-related spending during Golden Week (October 1–7)—even on top of a substantial decline last year—bodes ill for a near-term uptick in retail sales growth.

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Figure 1. Total China Retail Sales (ex. Food Service; incl. Automobiles and Gasoline): YoY % Change [caption id="attachment_134683" align="aligncenter" width="725"] January and February figures are reported together
Source: National Bureau of Statistics/Coresight Research [/caption]   Retail Sales Growth by Sector Seven sectors saw double-digit year-over-year growth in September as sales growth accelerated from August.

• Communication equipment performed strongly in September, growing 22.8% year over year—a stark contrast from August’s negative year-over-year growth. On a two-year basis, communication equipment grew 20.4%.
• School/office supplies and computers had another strong month, exhibiting 22.6% year-over-year growth, a slight acceleration from August’s 20.4% growth. On a two-year basis, this sector increased by 39.1%.
• The apparel and footwear sector exhibited negative year-over-year growth for the second consecutive month. The sector saw sales decline by 4.8% year over year, slightly improving from August’s 6.0% decline. On a two-year basis, the sector did show slight growth of 0.4%. The domestic apparel sector had previously benefited from a recent shift in consumer spending from international to domestic brands—however, strict Covid-19 restrictions are likely adversely affecting consumers’ ability to shop.
• Furniture sales growth slowed for the third consecutive month—however, it remains positive against weak year-over-year comparatives. Sales were down 15.2% on a two-year basis.
• The food sector continued to perform steadily overall; however, growth rates have been declining for four consecutive months. Food retail sales in September 2021 saw 9.2% year-over-year growth and 12.3% compared to the same period in 2019.
• Alcohol and tobacco remained a strong sector, posting 16.0% year-over-year growth and growing 31.8% on a two-year basis.

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Figure 2. China Retail Sales (ex. Food Service; incl. Gasoline and Automobiles), by Sector: YoY% Change and Two-Year % Change [wpdatatable id=1357 table_view=regular]

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The sector breakdown is based on surveys from enterprises with annual sales of ¥5 million (around $730,000) and above Source: National Bureau of Statistics Online Retail Sales Account for 28.9% of All Retail Sales In September, online retail sales growth in China increased by 39.4%—its highest point in the past year. The channel accounted for 28.9% of total retail sales in the period, remaining in line with June and August for some of the highest levels of online sales seen in 2021. Elevated online penetration in the last two months is likely related to strict, government-enforced Covid-19 restrictions to control infections. Online retail sales include food service, as the National Bureau of Statistics does not provide online data that exclude food service. In Figure 3, online sales are benchmarked to total retail sales.

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Figure 3. Online Retail Sales (YoY % Change) as a Proportion of Total Retail Sales (%) (incl. Automobiles, Gas and Food Service) [caption id="attachment_134690" align="aligncenter" width="724"] Online retail sales include food service
January and February figures are reported together
Source: National Bureau of Statistics [/caption]