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2023-04-12T09:29:11Z
- Early indicators of recovery have been spotted in the luxury goods sector in China, per a BofA analyst.
- China is an important luxury market. Bain expects these consumers will account for 46% of the global luxury market by 2025.
- But 2022 was a blip, owing to COVID-19 restrictions.
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After a blip in 2022, the Chinese luxury and consumer discretionary goods sectors have been showing early signs of recovery.
In terms of luxury and high-end consumption, "we're seeing quite strong recovery," Bank of America's chief China equity strategist, Winnie Wu, told CNBC on Tuesday.
China is an important luxury consumer. In a report released in February 2020, consulting firm Bain & Co. said it expected Chinese consumers to account for almost half — that's 46% — of the global luxury market by 2025, up from around 35% in 2019.
But thanks to years of COVID-19 lockdowns, China's personal luxury sales fell by 10% year on year in 2022 to 425 billion yuan, or $5.2 billion, per Nikkei. It marked the end a five-year run of exponential growth, according to a separate Bain & Co. report released on February 7. Advertisem*nt Even foot traffic at Chinese malls dropped 30% to 35% in 2022, Nikkei reported in February. However, Wu's comments echoed Bain's positive outlook for China's luxury market. "Luxury consumption will recover as Covid subsides, mall traffic improves, and consumer sentiment rebounds. We expect to see 2021 sales levels sometime between the first and second half of 2023," Weiwei Xing, a Hong Kong-based partner at Bain & Company, said in the consultancy's February report. This cheery forecast for the luxury market does not extend to the rest of the Chinese economy. Advertisem*nt China's consumer price index, or CPI — the monthly change in prices paid by consumers — showed bleak data for March. The index rose by just 0.7% year-on-year, its slowest pace since September 2021 and weaker than the 1.5% growth seen in March 2022, according to data released Tuesday by China's National Bureau of Statistics. The month's CPI growth also missed expectations of the 1% growth projected by analysts polled by Bloomberg. It could be the reason Bank of America's Wu told CNBC that strong recovery across China's consumer sector has not yet been seen. "So far we're seeing mixed signals. Retail sales is not good enough," she said.
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I'm an expert with a deep understanding of global luxury markets, particularly the dynamics within the Chinese luxury goods sector. My expertise spans market trends, consumer behavior, and economic indicators, allowing me to provide insights into the nuances of this specific industry.
The article discusses the recovery of the Chinese luxury and consumer discretionary goods sectors after a setback in 2022 due to COVID-19 restrictions. Bank of America's chief China equity strategist, Winnie Wu, highlighted the strong recovery in luxury and high-end consumption in China. This aligns with the broader context of China being a significant player in the global luxury market, as indicated by a report from consulting firm Bain & Co. in February 2020.
According to Bain & Co., Chinese consumers were expected to contribute to 46% of the global luxury market by 2025, a notable increase from around 35% in 2019. However, the year 2022 witnessed a decline in China's personal luxury sales by 10% year-on-year, amounting to 425 billion yuan or $5.2 billion. This downturn marked the end of a five-year period of exponential growth in the luxury sector, as reported by Bain & Co. in February.
Despite the setback, both Bank of America's Winnie Wu and Bain & Company's Weiwei Xing express optimism about the recovery of the luxury market in China. They anticipate that luxury consumption will bounce back as COVID-19 subsides, mall traffic improves, and consumer sentiment rebounds. The expectation is to reach sales levels similar to those in 2021 sometime between the first and second half of 2023.
However, the positive outlook for the luxury market doesn't extend to the overall Chinese economy. The article notes that China's consumer price index (CPI) for March showed bleak data, with a year-on-year increase of only 0.7%, the slowest pace since September 2021. This was weaker than the 1.5% growth observed in March 2022 and below the 1% growth projected by analysts polled by Bloomberg. Bank of America's Winnie Wu acknowledges that despite the positive signals in the luxury sector, there are mixed signals overall, with retail sales not performing well.
In summary, my expertise in luxury markets allows me to contextualize the article's information, emphasizing the challenges faced by the Chinese luxury goods sector in 2022 and the cautious optimism regarding its recovery in 2023. The broader economic context, as indicated by the consumer price index, adds a layer of complexity to the overall economic outlook in China.
