Holiday spending suggests strong consumption growth

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.