Year of the Rabbit gets off to a hopeful start

Domestic travel and retail sales picked up in China during the week of Lunar New Year, the first time in three years that people have been free of Covid-19 lockdown restrictions during this period.

Why it matters

The Lunar New Year holiday is an important indicator of consumer sentiment following the easing of Covid restrictions late last year and the sharp wave of infections that followed. And that’s significant not just for the domestic economy, but for the many businesses around the world which have been looking to China for growth.

“The global consumer goods industry has its eyes on the Chinese Spring Festival 2023 – the acid test for the Chinese consumption engine,” Bobby Verghese, consumer analyst at data analytics firm GlobalData, told Xinhua. Many analysts expect the recovery seen last week to continue during Q1 and accelerate in Q2. 

Key figures 

• Retail sales during the just finished holiday week were up 12% on the same holiday period last year.

• Domestic travel was up 23% compared to last year and back at 88% of pre-pandemic levels.

• Offline transaction volume jumped 23%; hotel and restaurant transaction volumes were up 76% and 40% respectively.

• Major luxury brands reported some “revenge spending”, said WWD, and with a lot of luxury spending likely to remain in the domestic market for some time yet, luxury brands are looking to increase their retail footprint in China.

A cautionary note

After three years of Covid-19 restrictions, it’s easy to assume the only way is up. But Fitch Ratings has noted factors such as the weak employment outlook, a housing market slowdown, a lack of a direct stimulus package, and the prospect of a Covid-19 resurgence, suggesting that China’s retail rebound will be “bumpier” than in other countries. 

Sourced from Xinhua, WWD