Retail sales in China continue to slow, miss expectations
Retail sales in China rose 10.2% from last year in January and February, a healthy number in U.S. terms but missing expectations of an 11% gain from economists surveyed by Bloomberg.
Retail sales were affected by industrial output fall-off and a slowdown of the economy. Industrial output rose 5.4% year-over-year in the period, missing the 5.6% expected from Bloomberg economists.
China’s middle class remains strong and continues to grow, boding well for retail sales. But consumers’ outlook in the country promises to reign in retail spending somewhat.
China’s economy is shifting, driven more by consumption than manufacturing. Certainly, growth has tempered. The fast-moving consumer goods (FMCG) retail market, for example, grew 5.4% in 2014 compared with 11.8% in 2011, according to Bain’s China Shopper Report released last October. And luxury retailers were reporting slower spending by Chinese consumers last year.
"The overall growth profile remains still gloomy," Zhou Hao, an economist at Commerzbank AG in Singapore, told Bloomberg about the numbers so far this year. "The mix of data give us a worrying picture. Activity data remained weak while inflation and property prices are turning around."
The shifting picture has many retailers looking to other markets, like India, for sales growth and expansion. India also has a growing middle class with many advantages, like a large millennial mobile-first generation and English as a common language, that China doesn’t offer.
“I expect to see a lot of action in the next 10 years in India,” Venkat Viswanathan, founder-chairman of LatentView Analytics, told Retail Dive earlier this year. “I believe we are still at a very early stage of realizing the potential of a market the size of India, and that it’s only a matter of time that India becomes an equally big part of the [business] ecosystem.”
But India also has some arcane rules about setting up shop there, he noted, as well as fulfillment challenges, that have served to stymie retail expansion.
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