Report: China’s Consumer Spending Lags Due to Weak Confidence

China’s lifting of COVID restrictions has reportedly not been enough to support consumer spending.

Domestic travel spending remains 16% below pre-pandemic levels, home sales are slower than normal and car sales have fallen 6% short of where they were a year ago, Bloomberg reported Monday (June 26).

“As pent-up demand fades and the risk of an economic double-dip becomes more real in coming months, we expect in-person services consumption growth to weaken further,” Nomura Holdings Chief China Economist Lu Ting said in a research note released Sunday (June 25), according to the report.

The Bloomberg report attributed the slowdown to weak consumer confidence that has placed a drag on the initial rebound that took place after China ended its pandemic-era lockdowns in December.

Seeing the trends, economists and state-run media outlets have suggested there will be more monetary and fiscal stimulus to boost consumer consumption, adding to the policy rate cuts China’s central bank made earlier this month, according to the report.

Possible measures that could be taken include incentivizing local governments to accelerate their infrastructure funding, cutting interest rates and reducing the amount of cash banks must keep in reserve to stimulate the economy, and providing financial support for home buying and other consumer spending, the report said.

It was reported in May that new regulations were slowing down the recovery of consumer spending in China.

Thirty million service sector jobs were eliminated by COVID-era restrictions and by the impact of China’s new regulations on education, technology and property. Twenty million of those jobs will return this year and next, but 10 million will remain lost due to regulations.

The housing market has been impacted by regulations as well, following government moves against speculation, the report said.

Consumer spending in China is seeing an “incremental rebound,” but the recovery is “not like turning on a light switch,” KraneShares Chief Investment Officer Brendan Ahern said in May.

Ahern told the media outlet that he expected quarterly earnings for Chinese companies to improve with each consecutive quarter.