Lunar/New Year Holiday Begins in China
The Chinese New Year/Spring Festival began last night, starting a week of celebration where ancestors are honored and families gather for a reunion diner. This is typically a time when factory workers travel home and production in general slows, however this year will likely be different given the COVID-19 pandemic, lessening the almost 3b trips that are usually made during this holiday. We expect celebrations will still take place but with more viewing from home.
Last year’s celebration was right around when the virus was acknowledged by the Chinese government and some cancelled plans for family gatherings, leading to a drop in alcoholic beverage sales and typical gift items, while fast foods such as noodles, and staples sold out quickly as many prepared to cook at home rather than travel. Supermarkets in China saw a 12% decline in foot traffic while local markets saw an increase as they kept outside trips to a minimum and e-commerce sites saw an increase of 22% y/y.
We expect this year will be different again, as consumers have had considerable time to adjust to this new lifestyle. We expect movie-going at cinemas, a ‘tradition’ during the holiday, will be weaker than in the years before 2020, with at-home media being the preferred venue this year, but the bigger question is really Chinese consumer sentiment, as this will determine the over spend, regardless of whether it is on line or in person. From a y/y perspective, we believe sentiment will be better than last year, as the unknowns concerning the virus last year were many while this year physical and psychological adjustments have been going on over the past 12 months.
That said, it is hard to judge how much ‘pre-buying’ has been done in the CE space, so we temper our expectations a bit, but all in we expect overall holiday sales to rise y/y and we expect production during the holidays to remain higher than usual, with many workers remaining at production sites rather than returning home. We expect this is both due to the pandemic but also due to the fact that consumer electronics production globally has been hampered by both tight capacity and component shortages, leaving producers to use what is normally a very slow production period, to fill the gaps in customer orders. As we have noted previously, in some CE segments workers have been offered bonuses and gifts to incentivize them to work during the holiday, which we expect will have a positive effect on production relative to the norm.
Last year’s celebration was right around when the virus was acknowledged by the Chinese government and some cancelled plans for family gatherings, leading to a drop in alcoholic beverage sales and typical gift items, while fast foods such as noodles, and staples sold out quickly as many prepared to cook at home rather than travel. Supermarkets in China saw a 12% decline in foot traffic while local markets saw an increase as they kept outside trips to a minimum and e-commerce sites saw an increase of 22% y/y.
We expect this year will be different again, as consumers have had considerable time to adjust to this new lifestyle. We expect movie-going at cinemas, a ‘tradition’ during the holiday, will be weaker than in the years before 2020, with at-home media being the preferred venue this year, but the bigger question is really Chinese consumer sentiment, as this will determine the over spend, regardless of whether it is on line or in person. From a y/y perspective, we believe sentiment will be better than last year, as the unknowns concerning the virus last year were many while this year physical and psychological adjustments have been going on over the past 12 months.
That said, it is hard to judge how much ‘pre-buying’ has been done in the CE space, so we temper our expectations a bit, but all in we expect overall holiday sales to rise y/y and we expect production during the holidays to remain higher than usual, with many workers remaining at production sites rather than returning home. We expect this is both due to the pandemic but also due to the fact that consumer electronics production globally has been hampered by both tight capacity and component shortages, leaving producers to use what is normally a very slow production period, to fill the gaps in customer orders. As we have noted previously, in some CE segments workers have been offered bonuses and gifts to incentivize them to work during the holiday, which we expect will have a positive effect on production relative to the norm.
Chinese New Year - Source: asharkyu/Shutterstock
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