China’s two-speed economy: Services thrive, retail slows

Data Snapshot Despite overall low consumer confidence in mainland China, key sectors of the economy are growing strongly, according to McKinsey’s latest China Brief. The services sector, particularly food service and air passenger travel, saw a resurgence in the H1 2024, growing by 7.9% and 23.5% YoY, respectively, according to McKinsey’s latest China Brief. Retail sales expanded more slowly at 3.7%, while real GDP increased by 5.0%. These metrics reflect a mixed economy, where certain areas, especially those tied to services and domestic travel, are recovering at a faster pace despite the broader challenges of low consumer sentiment and a housing market downturn. Analysis The robust growth in food service and air passenger travel indicates a notable recovery in services-driven consumption, likely spurred by the easing of travel restrictions and pent-up domestic demand. This contrasts with the more modest growth in retail sales, underscoring the continued strain on Chinese consumers due to low confidence and a sluggish property sector. This divergence highlights opportunities for luxury and retail brands to pivot their strategies. As China’s domestic tourism flourishes, brands should consider expanding into service-oriented sectors such as travel retail and experiential luxury, which are likely to see sustained demand. At the same time, maintaining competitive pricing and managing inventory will be critical in navigating retail’s slower growth. The Jing Daily Data Snapshot presents a swift take and analysis on the latest data from the leading research firms in the Chinese luxury and lifestyle markets.

China’s two-speed economy: Services thrive, retail slows

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Published October 04, 2024

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China’s two-speed economy: Services thrive, retail slows