China – Retailers Experiencing Weak Season amid Economic Crisis

Retail sales in China registered a slow growth of 22% in October 2008 due to falling consumer confidence and easing inflation, induced by the slow economy of China.

Sales of retail products, ranging from cosmetics to furniture, in China slumped in October 2008, as reported by guardian.co.uk.

The National Bureau of Statistics (NBS) revealed that in October 2008, Chinese retail sales witnessed a sluggish annual growth of 22% to reach 8.8 Trillion Yuan ($1.28 Trillion). This is down from 23.2% hike registered in both September and August 2008 and 23.3% growth recorded in July 2008. Also, just 10.2% increase was recorded in the sales of edible oil and grains on YOY basis.

Further, the sales of poultry, eggs and meat grew 13.1% during January-September 2008, declining from 25.6% growth registered during Jan-Sep 2007. Meanwhile, car sales grew 19.6%, falling from 29.1% rise registered during the first nine months of 2007.

The slump in the Chinese retail sales has been triggered by the sluggish economy of the country that has weakened the consumer confidence. Further, the reduction in Chinese consumption would probably reverse the old tradition of strong expenditure, which gained the support from the increasing incomes and policies of the government to divert the growth away from exports and investments.

Moreover, the falling inflation amid the slowing economy also assisted the retail sales to grow slower. The profits of retailers are also declining due to decrease in the prices of assets. The slow growth in income, and the adversely affected wealth by the tumbling stock and property markets are also hitting the Chinese retail industry.

It is expected that in coming times also, the growth in Chinese household consumption would remain modest. However, the government is making every best possible effort to boost the sales and correspondingly, it planned to invest a motivation package of $586 Billion in the infrastructure and other sectors. This step was taken to improve the credit situation in China, reduce taxes and facilitate the consumer spending.

According to a Research Analyst at RNCOS, “The slow growth rate of retail sales, amidst gloomy economic conditions in the country, has cut down the profits of the retailers. Consequently, the retail industry of China has been affected badly. However, the investment plan of the government will push the demand for commodities in spite of fears of economic recession.”

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