China's retail sales continued to improve in October, with both real and nominal retail sales growing at a rapid 11% from last year.
There are two big takeaways from October retail sales numbers. First, consumption continued to strengthen while investment stabilized at a very weak 9.3% from October last year and production growth slowed well under half of its long-term trend to 5.6% on the back of declining heavy industries. Rebalancing has not only continued but has accelerated.
Second, retail sales have been improving post-stock market turmoil. That would support the view that stock market turmoil had limited negative pass through to the real economy. It would also indicate that potential spenders who delayed purchases on order to pile cash into the hot stock market earlier this year have reversed their behavior and are now deploying money into consumer goods having seen the ugly side of a stock market bubble.
The solid retail numbers were released just as more positive news for the consumer market rolled-in. Record-breaking online sales on "singles day" - a once obscure anti-Valentines day style holiday that Alibaba over the last six years has promoted to the largest online retail shopping day on the planet - bodes well for continued retail growth. Alibaba alone had $14.36 billion in sales for the day, up 60% from last year, compared to less than $3 billion spent with all online retailers on Cyber Monday in the US last year. According to Wired, the company plans on deploying 1.7 million delivery personnel to handle the business.
Beijing also announced today a number of policy plans intended to boost consumption. These include encouraging imports of consumer goods through tax policies, accelerating household registration reforms, and encouraging businesses to improve product quality.
It is important to reiterate that while improved consumption and accelerated rebalancing are good for economic stability and benefit specific sectors directly, the benefits of improved consumption cannot fill the hole in global demand left by China's slowing industry. Industry import demand dwarfs consumer goods imports by a wide margin. See my posting Rebalancing To Consumption Is Grinding Forward, But Don't Expect Chinese Consumers To Revive Global Growth.