Growth Rates of Consumption
The economic downturn drags income growth down, and then curtail consumption growth. The household consumption is expected to edge down in the second half of 2016 and in 2017. The per capita real disposable income of urban households is projected to grow by 5.77% in 2016, down by 0.83 percentage points over 2015, and increase 5.43% in 2017, down further by 0.34 percentage points over 2016. The per capita real cash income of rural residents is expected to go up by 9.06% in 2016, 0.95 percentage points lower than that in 2015, and pick up by 8.29% in 2017, down further by 0.77 percentage points over 2016 (see Fig. 2.8).
Fig. 2.8 Projected growth rates of income of rural andurban households. YoY. Note yd_u_c_pc denotes per capita real disposable income of urban households, yc_r_c_pc denotes per capita real disposable income of rural residents. Source CQMM team calculations
Real household consumption is projected to grow by 8.06% in 2016, a decline of
- 0. 04.percentage points over 2015, down further to 7.84% in 2017, 0.22 percentage points lower than that in 2016. Total retail sales of consumer goods at current price is expected to expanded by 10.3%, down slightly by 0.4 percentage points over
- 2015, and it is projected to fall slightly to 10.05%.
Real household consumption growth in 2016 is expected to appear before high after low tendency, down to 7.33% in the third quarter and 5.98% in the fourth quarter. Slightly fluctuate in 2017, with lowest rate of 7.08% in the third quarter. Growth of total retail sales of consumer goods at current price will stay stable in
2016, with the lowest rate of 9.94% in the third quarter. And it will maintain quite steady, with each quarter is expected to be above 10% (see Fig. 2.9).
In summary, according to the CQMM, China’s economic growth is forecast to continue edging down due to decelerating investment growth and week exports growth, while the deflation risks remain low.
- 1. The GDP growth in 2016 is projected to rise 6.63%, 0.3 percentage points higher than that over 2015. The CPI is expected to climb 2.01%, an increase of 0.57 percentage points over 2015. The PPI is forecast to drop by 3.19%, 2.01 percentage points higher than that in 2015. And the GDP deflator is projected to pick up by 0.79%, an increase of 1.2 percentage points over 2015.
- 2. The decline in growth of manufacturing investment and private investment has put pressures on total investment growth. The growth of investment in fixed assets (excluding rural households) in 2016 is projected to expand by 9.72%, a drop of 0.47 percentage points over 2015.
Fig. 2.9 Projected growth rates of consumption. YoY. Note CON_D_C denotes real household consumption growth rate; RETAIL denotes real growth rate of total retail sales of consumer goods. Source CQMM team calculations
- 3. The growth of per capita real disposable income of households is expected to edge down, suggesting that the household consumption is expected to slow down. The total retail sales of consumer goods in 2016 are forecast to go up by 10.3%, a decline of 0.4 percentage points over 2015.
- 4. Both the result of UK referendum and the lower-than-expected US GDP growth rate in the second quarter imply that the materialization of an important downside risk for advanced economies. The total value of exports in dollar terms in 2016 is expected to fall by 6.01%, down by 3.79 percentage points over 2015. The total value of imports is projected to decline by 14.12%, slightly up by 0.27 percentage points over 2015.
- 5. Owing to RMB depreciation expectations arising from economic slowdown and pressures put by capital outflows, China is projected to continue depleting its foreign exchange reserves to stabilize RMB. Foreign exchange reserves at the end of 2016 would fall to 2.98 trillion dollars.