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Impressive Retail Sales Numbers From China, But 2015 Target Seems Aggressive

 November 12, 2012 10:45 AM


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

[Related -The Skills Mismatch Remains a Fixture in US Labor Markets]

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. According to some estimates, China's GDP for 2012 will be around RMB 50 trillion (closer to 51 according to World Bank - if anyone has a better projection please send us a note). That puts consumer spending in China at (very roughly) 40% of the GDP. Note that this represents just consumer goods - excluding services. 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%.

[Related -The Enduring Strength of the U.S. Economy]

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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