Minsheng Securities: Retail sales in December exceed expectations, with strong growth in durable goods such as home appliances, while optional and dining sectors are relatively weak.

Minsheng Securities released a research report stating that the month-on-month employment in December remained stable, with retail sales exceeding expectations, and goods outperforming catering. It is optimistic about the increase in national subsidies in 2025 and the expansion of product categories to drive domestic demand. Specifically, durable goods such as household appliances and communication equipment have seen high growth, benefiting from national subsidies and replacement cycles. Essential items like tobacco and alcohol have seen an increase in month-on-month growth, while optional items and catering continue to show weakness. Minsheng Securities' main points are as follows: 1. Retail sales in December exceeded expectations, with goods outperforming catering: Retail sales in December increased by 3.7% year-on-year (WIND consensus expectation was +3.49%), with non-automobile retail sales increasing by 4.2% year-on-year. Goods retail sales in December increased by 3.9% year-on-year, while catering sales increased by 2.7% year-on-year. The full-year retail sales increased by 3.5% year-on-year, showing optimism for the increase in national subsidies in 2025 and the expansion of product categories driving domestic demand. In 2024, the year-on-year per capita income/expenditure of residents increased by 5.3%, with per capita service consumption expenditure increasing by 7.4%, accounting for 46.1% of per capita consumption expenditure, an increase of 0.9 percentage points from the previous year. 2. Durable goods such as household appliances and communication equipment saw high growth, benefiting from national subsidies and replacement cycles; the 2025 Spring Festival came early, leading to an increase in the essential items of tobacco and alcohol; optional items and catering remained weak. - Durable goods: Benefiting from national subsidies, household appliances and furniture showed accelerated growth month-on-month, while communication equipment continued to show strong growth under replacement cycles; the growth rate of automobiles declined. In December, retail sales of automobiles increased by 0.5% year-on-year (previous value was +6.6%), with passenger vehicle sales increasing by 12% year-on-year (previous value was +16.5%, with a full year increase of 5.5% to 22.89 million vehicles); household appliances increased by 39.3% year-on-year in December (compared to +34.5% for the October-November period), and communication equipment increased by 14% year-on-year. According to Oviyun online retail sales, in December, the year-on-year increase was 30.1% for color TVs, 15.3%/6.5%/12.8% for refrigerators/freezers/washing machines in the white goods category, and 38.9%/43.0%/57.0% for kitchen appliances and gas stoves/dishwashers, and a 0.7% increase for small household appliances. In December, the operating amount of the top 100 real estate developers was the same as the previous year (a 28% decrease from 24 years), and building materials showed a slight increase. - Essential items: Beverages were weak, and the early Spring Festival in 2025 drove the demand for tobacco and alcohol. In December, food/beverage/tobacco and alcohol retail sales increased by 9.9%/-8.5%/+10.4% year-on-year, compared to +10.1%/-4.3%/-3.1% for the previous month. - Optional items: The mild winter in 2024 affected the demand for footwear and clothing, while sports and entertainment maintained a good level of activity throughout the year, and demand for cosmetics and jewelry was weak. In December, footwear/cosmetics/jewelry saw a year-on-year decrease of -0.3%/-0.8%/-1.0% (compared to +4.3%/+4.3%/-1.8% for the October-November period). Sports and entertainment related to service consumption remained strong throughout the year, with a year-on-year increase of 16.7% in December and 11.1% for the full year. 3. In December, month-on-month catering showed a weakening trend. - Online channels saw a slowdown in growth. In December, catering sales increased by 2.7% year-on-year (previous value was +4.0%), and dining in restaurants increased by 1.2%. Physical online retail sales in 2024 increased by 6.5% year-on-year (cumulatively 6.8% from January to November), with a year-on-year increase of 21% in express delivery volume to 174.5 billion items. 4. Employment in December remained stable month-on-month. - The service sector business activity index rose to 52.0 in December, the highest value of the year, while the urban surveyed unemployment rate increased slightly to 5.1% month-on-month. The PMI index for employed persons remained stable (with a month-on-month decrease of 0.1 percentage points to 48.1 in the manufacturing sector and an increase of 0.4 percentage points to 45.4 in the non-manufacturing sector) in December.