“At The Moment, It’s Carnage” – The Startling Truth About China’s ‘Strong Consumer’

One of the biggest false narratives pitched by the mainstream to mitigate concerns about a global recession, is that even as China’s massively overlevered manufacturing sector is careening into a hard landing, China’s “strong” consumer base will keep the country’s economy afloat (a narrative shared with the U.S.), even though as reported over the past weekend retail sales soundly disappointed expectations, while the latest proxy of China’s consumer strenth, namely “record” box office receipts, was recently uncovered to have been – like everything else in China – mostly fabricated.

There is one main problem with this: China’s consumer is neither strong, nor resilient, and is in fact getting weaker, and more angry by the day as China’s labor conditions continue to deteriorate: just yesterday we reported that “Enormous Crowds” Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police. Granted this is taking place in China’s industrial region, where massive overcapacity has led many local companies to the verge of bankruptcy, however the weakness has clearly spilled across to all other parts of the country.

An overnight report confirms as much: according to Reuters, “retailers in China are shedding staff, slowing expansion plans and seeing stocks pile up in warehouses as shoppers tighten their belts – a major headache for a country that has pinned its hopes on consumers to drive economic growth.”

Hardly supportive of the “strong Chinese consumer” narrative, Reuters adds that with that growth running at its slowest in a quarter of a century, China’s consumption patterns are changing, with wealthy middle-class households trading down from up-market to more affordable brands, and poorer families paring back on even basic purchases.

China’s top 50 retailers saw sales fall 6 percent at the start of the year, and sales of basic goods from noodles to detergent grew just 1.8 percent at the end of last year, down from over 9 percent just three years ago, according to Kantar Worldpanel data.

The weak sales of even cheap household goods underlines the challenge for China, desperate to get its 1.4 billion people to spend and give some fresh impetus to the economy.