From HKTDC Research, 14 May 2013
Shen Danyang, press spokesperson of the Ministry of Commerce (MOFCOM), noted that the relevant government departments are studying policies to encourage consumption. He added that such policies would not be formulated solely by MOFCOM, but a host of administrative departments overseeing the macro economy.
According to Shen, the total retail sales of consumer goods in the first quarter of this year rose by 12.4% year-on-year. The growth rate is down slightly when compared to the same period last year. However, after adjusting for price changes, the actual growth rate is just 0.1 percentage point lower. In other words, the growth rate this quarter is basically on a par with that of the year-earlier period.
"Consumption in March was higher than the two preceding months. Overall, the consumer market was growing slowly but steadily in the first quarter," Shen said. Meanwhile, consumption has played a bigger role in driving the economy. In the first quarter, consumption contributed 55.5% towards GDP growth. The figure was 3.7 percentage points higher than that of the whole of last year.
"The slowdown in the growth rate of the consumer market is only in terms of nominal growth. The reasons are many, but we believe there are four main ones," Shen said. First, there was a slowdown in the growth rate of commodity prices. Retail prices of commodities in the first quarter increased by 1.4%, representing a 2.1 percentage point drop from that of the same period last year and resulting in a slower growth rate in consumption in nominal terms. Second, car sales and consumption of petroleum and related products experienced a relatively greater drop in light of the policies implemented in some regions to restrict the purchase and use of cars as well as the influence of the weather. Third, measures on curbing extravagant spending have proved effective. Fourth, the growth in income in urban and rural areas has slowed down. In the first quarter, the growth rates in real terms of urban residents' per capita disposable income and rural residents' income in cash have fallen by 3.1 percentage points and 3.4 percentage points respectively compared to the corresponding period last year.
On the performance of the consumer market this year, Shen believed that the outlook is optimistic. Barring any major mishaps, the total retail sales of consumer goods this year are expected to "begin at a low level but rise later". As the macro economy takes a turn for the better and the investment environment for the consumer market improves, the growth rate in consumption is set to pick up in the third and fourth quarters. The target growth rate of 14.5% for the whole year may still be achieved.