Monday, November 12, 2012

Impressive retail sales numbers from China, but 2015 target seems aggressive

The chart below from Trading Economics shows China's total retail sales of consumer goods %YoY. The October number came in at 14.5% a bit ahead of expectations - definitely a strong result.

Source: Trading Economics

When looking at the year-over-year numbers, it is difficult to appreciate the notional increases in retail sales. The absolute growth in RMB terms is quite spectacular.

Source: ISI
A very rough estimate puts the retail sales at RMB 20 trillion for 2012. Beijing wants that number higher, as it tries to transition to a more consumer driven economy. Apparently the target is to get to RMB 32 trillion by 2015 - a 60% increase from current levels (17% growth per year). That's a fairly aggressive target, given that most of this year growth was under 15%.

For now export growth, particularly to the US (see discussion), will be the key driver of China's GDP. And with the US consumer confidence hitting new highs (see chart) as the holiday season approaches, China may be in luck.


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