Falling home prices and fears about job prospects will deter Chinese consumers from freely spending on goods such as clothes and home appliances, weighing on the nation’s retail sales growth, according to UBS, reports the South China Morning Post. Retail sales are expected to climb 5.5% in 2024, one percentage point lower than the estimated 6.5% rise last year, according to the Swiss bank’s estimates.
“A drop in home prices will have a negative psychological impact on consumers since they feel their net worth has shrunk,” Christine Peng, a UBS analyst, said at a media briefing in Shanghai on Monday. “As a result, consumers are reluctant to tap their bank savings to spend.”
Consumption has long been a major growth driver of China’s economy as the country’s 400 million middle-income residents chase high-quality goods to improve their living standards.