BEIJING (Reuters) - Slower income growth and soft home sales are hurting consumer spending growth in China, an official with the country’s planning agency said on Thursday, although consumption was expected to pick up again as various seasonal factors recede.
A slowdown in home sales growth in the first half of the year to 3.3 percent from 16.1 percent a year earlier has hit spending on housing-related items such as furniture, Liu Yunan, a deputy department head at the National Development and Reform Commission (NDRC), told reporters at a news conference.
Weaker spending growth this year has raised some doubts about China’s efforts to rebalance the economy towards domestic consumption away from credit-driven investment.
Per capita consumption by urban residents increased 4.7 percent year-on-year in the first half, compared with 5.1 percent growth a year earlier, and weaker than the 6.8 percent growth in the overall economy. Per capita consumption including rural residents increased 6.7 percent in the first half.
“In addition, the slowdown in household income growth may also have constrained some residents’ spending power and expectations...Our preliminary judgment is that the supporting effect of income on consumption has also weakened,” said Liu.
Liu added that he expected consumer spending growth to pick up again as one-off and seasonal factors retreated.
He said retail sales growth has mainly been dragged by delayed automobile purchases in anticipation of tariff cuts and the timing of a holiday in June, but that spending should see “some degree of a rebound”.
Liu also said that the official retail sales data do not fully capture overall consumer services spending and he believes China’s consumption growth is still “reasonable”.
“Overall I think our country’s household consumption will still maintain stable growth,” he said.
Reporting by Elias Glenn; Writing by Yawen Chen; Editing by Sam Holmes