Social Consumption in China Shows Steady Recovery, with Potential for Further Growth
In June 2023, social consumption in China experienced a 3.1% year-on-year increase, indicating a stable recovery trend. According to data released by the National Bureau of Statistics, the total retail sales of consumer goods, referred to as “social zero,” reached 22,758.8 billion yuan in the first half of the year, representing an 8.2% growth. In June alone, social zero sales amounted to 3,995.1 billion yuan, showing a 3.1% increase. Experts estimate that the compound growth rate from January to June 2023 will be 3.6%, while the rate for June will be 3.1%, highlighting the consistent recovery of social consumption.
The retail sales of urban consumer goods reached 19,753.2 billion yuan in the first half of the year, with an 8.1% increase. On the other hand, rural consumer goods accounted for 3,005.6 billion yuan, showing an 8.4% surge. Overall, social consumption has demonstrated stable momentum during the first half of the year. However, there is still untapped consumption potential that needs to be released. Investment recommendations suggest focusing on leading companies with competitive advantages and improved brand potential.
The report also indicates that while must-choice consumer goods remain stable, optional consumer goods are experiencing marginal recovery. In terms of price factors, the Consumer Price Index (CPI) remained relatively flat in June 2023, with a year-on-year growth rate of 2.3% for food CPI. Commodity consumption displayed mixed results, with retail sales reaching 3,558.1 billion yuan in June, representing a 1.7% increase compared to the previous year. Must-choice consumer goods, including grain, oil, food, beverages, tobacco, and wine, exhibited a stable growth rate. Optional consumer goods like gold, silver jewelry, cosmetics, clothing, shoes, and hats showed a marginal recovery trend after excluding the low base effect.
The report highlights the increased penetration rate of online channels due to the 6.18 e-commerce promotion. Online retail sales in the first half of 2023 reached 6,062.3 billion yuan, accounting for 26.6% of total retail sales. This marks a 1.0% increase compared to the same period in 2022. Food, clothing, and daily necessities saw year-on-year growth rates of 8.9%, 13.3%, and 10.3%, respectively. However, the growth rate of offline channels, such as supermarkets, convenience stores, department stores, specialty stores, and specialty stores, dropped compared to the previous period.
Looking forward, the report suggests paying attention to high-quality brand companies in sectors related to domestic consumption recovery. With increasing income levels, continued implementation of consumption promotion policies, and the growth of emerging consumption, there is expected potential for further growth. The investment advice focuses on three main areas: the gold and jewelry sector, where offline consumption is expected to recover; the medical aesthetics sector, which is likely to benefit from regulatory efforts and increased compliance; and the cosmetics sector, where leading domestic brands show strong performance and operational capabilities.
However, the report also highlights some risks, including the ongoing impact of the pandemic and increased operating costs for businesses.
(Source: Kaiyuan Securities)