The recovery in China’s consumer spending has been “rapid” since the country reopened, the economic planning agency said, a rebound that’s also prompted banks like UBS Group AG to upgrade growth forecasts into next year.
(Bloomberg) — The recovery in China’s consumer spending has been “rapid” since the country reopened, the economic planning agency said, a rebound that’s also prompted banks like UBS Group AG to upgrade growth forecasts into next year.
The government wants consumption to play a bigger role in driving the economy this year and will take measures to help support spending, Li Chunlin, a vice chairman of the National Development and Reform Commission told reporters on Monday.
UBS now expects gross domestic product to expand 5.4% in 2023, up from an earlier estimate of 4.9%, amid a faster-than-expected rebound after Covid restrictions were abruptly dropped in December. A gradual improvement in consumer confidence will help to lift next year’s outlook too, UBS economists including Wang Tao wrote in a note Monday.
The economic re-opening is proceeding better than forecast, with a second wave of Covid infections not materializing and little sign of supply disruption, UBS said. The housing market is also recovering after years of declines in home sales and prices.
Underscoring the recovery in consumer spending, the value of cinema ticket sales in the first nine weeks of the year rose 11.8% from the same period in 2022 to reach over 14 billion yuan ($2 billion), according to latest data from Maoyan Entertainment.
UBS raised its 2024 growth forecast as well, to 5.2% from 4.8%. The consensus estimate in a Bloomberg survey of economists is for GDP growth to reach 5.3% this year and 5% in 2024.
Beijing is targeting GDP growth of around 5% this year, a less ambitious goal than many economists had expected, and a sign that authorities will likely refrain from rolling out more fiscal and monetary stimulus.
The government has repeatedly said it wants consumption to play a “fundamental role” in expanding domestic demand and growth, which should reduce the need for massive government-led, debt-driven infrastructure investment.
The NDRC will seek to stabilize purchases of big-ticket products, expand rural consumption, raise household income and support demand for better housing, electric cars and elderly care, Li said at the briefing Monday.
“We are confident and capable of ensuring the implementation of policies to promote consumption this year, so that it will make a greater contribution to achieving the GDP growth target of around 5%,” Li said.
The recovery in consumption has been “rapid” this year as cross-province travel and tourism jumped, and sectors from catering to entertainment rebounded, he said. Growth will likely pick up gradually in the first half of the year, he added.
UBS said the government could announce more detailed support for key growth engines, like infrastructure investment and consumption, once new economic leaders take office. It’s “possible some consumption supporting measures will be rolled out by more local governments later,” the economists said.
Monetary policy is likely to remain “accommodative” although there’s unlikely to be another cut to the central bank’s policy interest rates, UBS said.
–With assistance from Tom Hancock.
(Updates with comments from NDRC starting in first paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.