Holiday spending suggests strong consumption growth

BEIJING - Chinese people spent 13.3 percent more on shopping and eating during the seven-day Lunar New Year holiday, which illustrated high consumer confidence despite a softening growth momentum of the economy at the start of 2014.

Analysts said the holiday spending figures suggested demand among Chinese consumers remained healthy even though luxury spending was hit further by an escalation of the government's frugality campaign.

Spending spree

The Lunar New Year, which fell on Jan 31 this year, is the most important holiday in China for family reunion. The weeklong holiday traditionally means a splurge for many of the 1.4-billion people.

In the so-called Golden Week holiday which ended on Feb 6, sales of retail and catering enterprises amounted to 610.7 billion yuan ($100.8 billion), up 13.3 percent year on year, data from the Ministry of Commerce revealed on Thursday.

As people celebrated the year of horse in the 12-year cycle of the Chinese zodiac, horse-themed jewelry sold briskly, with sales up 35 percent, 31.6 percent and 30.2 percent year on year in shopping malls in Hubei, Liaoning and Heilongjiang provinces respectively, according to the ministry.

But sales of luxury goods as a whole fell sharply partly due to a nationwide campaign against extravagance and call for a frugal lifestyle. In the southeastern city of Fuzhou, the sales volume of expensive alcoholic beverages fell nearly 70 percent in some supermarkets.

Tourism and entertainment sectors prospered.

Box office revenue in the first three days of the holiday exceeded that of the whole Lunar New Year holiday in 2013.

National tourism revenue reached 126.4 billion yuan during the holiday, up 16.4 percent from a year earlier, the National Tourism Administration said on Friday.

The number of tourists topped 231 million across the country in the seven days, up 14 percent year on year.

In another telling figure, total value of transactions at home and abroad through China UnionPay cards during the seven days jumped 23 percent year on year to nearly 200 billion yuan.

Card payments in supermarkets and shopping malls continued to lead the growth, up 22 percent and 27 percent respectively, according to China UnionPay, the national bank card operator.

Consumption growth

Holiday spending provides a good opportunity to examine Chinese consumers' confidence, said chief China economists with Bank of America Merrill Lynch Lu Ting in a research note.

"Actually it's the first reliable set of activity data every year as other monthly data in January are significantly biased by the timing of Lunar New Year holidays," he said.

China's macro data released in February, especially the disappointing manufacturing activity index (PMI), worried people because of softening growth momentum and the shaky start of the Chinese economy in 2014.

The country's monthly macro data in January and February are traditionally distorted by the effect of the Lunar New Year, which is difficult to remove statistically due to the short sample periods and floating dates.

Business and industrial activities may have slowed down and small enterprises could send migrant workers home weeks ahead of the weeklong holiday.

The 13.3-percent growth of national sales revenue itself is quite robust, though it is slightly below the 13.6-percent increase in retail sales in December, and is also below the 14.7-percent reading recorded in the Lunar New Year Golden Week of 2013, Lu said.

"The holiday spending data support our view that growth in China will be relatively stable despite a new round of worries on a hard landing," he said.

Retail sales, along with investment and exports, has been one of the three main drivers for China's rapid economic growth.

"We do not think a notable growth slowdown is evident at present. But we caution about a possible deterioration in market sentiment relating to China's growth outlook," Lu said earlier in another research note.