Goldman Sachs - China Consumption Dashboard: 202... Goldman Sachs - China Cons… · @2030FY_X · TwKit

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Goldman Sachs - China Consumption Dashboard: 202... Goldman Sachs - China Consumption Dashboard: Q3 2026 | Consumption and income growth slow down 1. Macro consumption momentum: Weakening QoQ, both nominal and real growth retreating According to the National Bureau of Statistics quarterly household survey, national per capita disposable income in Q3 2026 grew by 5.4% year-over-year in nominal terms, slightly down from 5.6% in Q2; the seasonally adjusted annualized quarter-over-quarter growth rate slowed sharply to 4.4% from 5.2% in Q2. Weakness on the consumption end was even more pronounced: the YoY growth rate of per capita nominal consumption expenditure dropped from 3.8% to 3.5%, and the seasonally adjusted annualized QoQ growth rate plunged from 3.6% to 0.2%, reflecting a significant contraction in spending on transportation and communications, as well as education, culture, and entertainment, with only food consumption providing a partial offset. It is worth noting that the YoY growth rate of total retail sales of consumer goods in Q3 rebounded to 0.7% from 0.2% in Q2, primarily driven by a low base effect and the front-loading of some October consumption due to the earlier Mid-Autumn Festival holiday. This indicator showed a temporary divergence from the actual trend of household consumption and should not be over-interpreted as a substantive improvement in demand. 2. Labor market: Stable aggregate but structural divergence, wage growth still lagging nominal GDP The official surveyed urban unemployment rate edged up to 5.2% in September (from 5.1% in June), but the weighted average of the high-frequency PMI employment sub-indices improved QoQ, remaining only in a historically low range. Wage indicators presented a mixed picture: the YoY growth rate of official wage income slowed from 5.2% to 4.8%, and the growth rate of average monthly income for migrant workers also edged down to 2.9%; meanwhile, the labor cost sub-index within the Cheung Kong Graduate School of Business (CKGSB) Business Conditions Index pointed to accelerating wage increases. Goldman Sachs' proprietary wage tracking model showed that the YoY growth rate of urban wages rose slightly to 4.9% in Q3, but remained below the nominal GDP growth rate of 5.9% to 6.0% for the second consecutive quarter. Notably, although objective employment and wage data remained stable, subjective pessimism among investors regarding the AI substitution effect and employment prospects rose significantly during client communications, widening the gap between expectations and reality. 3. Household balance sheets: Precautionary savings continue to accumulate, deleveraging process mildly continues After seasonal adjustment, the household savings rate rose to 33.4% in Q3 from 32.7% in Q2, remaining persistently above the pre-pandemic trend level. Goldman Sachs' estimate of household excess deposits (the difference between actual deposits and the pre-pandemic trend value) further expanded to RMB 63 trillion in Q3. Although the absolute scale of deposits is still growing, the cumulative increase over the past 12 months as a percentage of GDP fell to 8.6% from 8.9% in Q2, indicating a marginal slowdown in the pace of savings accumulation. On the asset side, total national household assets increased QoQ to RMB 746 trillion in Q2 2026 (latest data), mainly contributed by a recovery in equity assets; on the liability side, dragged down by the contraction in outstanding mortgage and short-term consumer loan balances, the household leverage ratio has continued a mild downward trend since mid-2024, leaving the deleveraging trend unchanged. 4. Consumer confidence and policy expectations: Official index sluggish, micro surveys even weaker, incremental stimulus expected to be limited The National Bureau of Statistics consumer confidence index remained at a low level from July to August, largely flat compared to Q2. The high-frequency Morning Consult daily survey (which skews toward high-income groups) showed a relatively obvious decline in consumer confidence across all age groups and income percentiles in Q3, with the high-income group experiencing the largest drop, reflecting the combined impact of a shrinking wealth effect and weakening income expectations. On the policy front, the National Development and Reform Commission (NDRC) stated at an October 20 press conference that it is studying and formulating an implementation plan for the strategy to expand domestic demand (2026 to 2030), focusing on stabilizing employment, increasing income, strengthening public services, and building a unified national market, while also mentioning the removal of unreasonable consumption restrictions. However, Goldman Sachs pointed out that these statements are mostly repetitions of existing policies, and recent policy signals have focused more on high-tech investment areas such as the six networks (water networks, new power grids, computing networks, next-generation communication networks, urban underground pipeline networks, and logistics networks). Therefore, they maintain a cautious stance on the rollout of large-scale incremental consumption stimulus in the near term, upholding the judgment that the scale of incremental stimulus will be limited. 5. Core conclusions and investment implications In summary, China's Q3 2026 consumption data presented a combination of slowly declining income growth, weak consumption willingness, persistently high savings rates, and bottoming confidence indices, indicating that the foundation for macro recovery is not yet solid. The short-term rebound in retail data stemmed more from base effects and holiday mismatches rather than a reversal in endogenous momentum. Regarding asset allocation, against the backdrop of slow household balance sheet repair and AI substitution anxiety suppressing risk appetite, the consumption sector is unlikely to see systematic valuation expansion in the short term. Structurally, it is recommended to focus on sub-sectors with high-dividend defensive attributes and those benefiting from policy catalysts such as the six networks, while remaining cautious on discretionary consumption and targets reliant on leveraged consumption. The core tracking variables for the next 6 to 12 months are: the pace of releasing household excess deposits, the timing of convergence between urban wage growth and nominal GDP, and whether substantive consumption subsidies or personal income tax cuts are implemented from Q4 to Q1 of next year.

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