Consumer confidence is expected to soften in the second half of 2025, despite efforts by Chinese policy makers to support spending. That’s according to a new report by Fitch Ratings, which forecasts a slowdown in Q3 and Q4 consumption.
“Consumer spending growth picked up in 1H25 on the stimulus from a consumer goods trade-in program,” Fitch said in a media release. “However, we believe the extent of the consumption recovery’s durability is unclear without an improvement in consumer confidence. We expect consumption to slow in 2H25, as indicated by July’s moderating retail sales.”
China reported a 3.7% increase in retail sales last month, down from a gain of 4.8% in June. Analysts had expected a 4.6% increase.
Fitch noted that consumer confidence has been “subdued” since the Covid pandemic, and that this is likely to continue. The decline in confidence stems from uncertain income growth, employment opportunities and the knock-on effects of the country’s correction in property valuations.
“In the absence of a durable private consumption recovery, fiscal policy would remain a key pillar supporting GDP growth. Enhancing social safety nets will require additional fiscal spending, potentially adding to medium-term fiscal pressures amid already elevated deficits and declining fiscal revenue,” Fitch said.
“We do not expect significant additional fiscal stimulus in 2H25,” the firm continued. “[W}e are sticking with our 8.4% of GDP deficit forecast.”
Fitch forecasts GDP growth for the year to come in between 4.5% and 5%. That’s up slightly from its 4.2% call in June.