Weeks after China lifted its lockdowns to mitigate the spread of the coronavirus, there’s a sliver of hope for the country’s retail sector.
According to data from China’s National Bureau of Statistics (NBS), April retail sales rebounded to -7.5%. While still negative, it’s an increase from -15.8% in March and certainly a change from the sharp fall to -20.5% in the first two months of the year.
“China’s retail sales took a huge hit in Q1 and is starting to see some improvement," said Shelleen Shum, eMarketer forecasting director at Insider Intelligence. "We expect sales to return to growth in H2, but the full year’s performance will be dragged down significantly by a weak first half.
“China’s return to growth depends on whether the risk of a second wave of the virus can be curbed and on how the economy worldwide performs," she said. "A weak global economy will lead to slumping external demand, which will weigh heavily on China’s exports, a negative sign for employment and consumer spending.”
We estimate that retail sales in China will decline by 4.0% in 2020, a sharp contrast from our previous forecast of 4.5%, before returning to positive territory of 3.5% in 2021 and 5.4% in 2022. It's important to note that our data differs from NBS's because we don't include restaurants and catering in our forecasts.
Retailers are starting to see early glimpses of hope as early as late March. H&M, which operated 520 stores in China by the end of 2019, saw year-over-year sales plummet 89% during the week ending on January 30, when 64% of its stores were closed, according to GlobalData cited by Inside Retail. By the week of March 26, nearly all of H&M's stores were back in business, with sales down 23%.