China's Consumer Spending Rebounds as Deflation Slows, Bain Reports

The outlook for 2025 is still unclear because of an ongoing consumption downgrade and changes in spending patterns

The fast-growing consumer products industry in China is showing early indications of a rebound in expenditures, which is helping to slow down the decrease in sales prices amid several years of deflation, as stated in a report by Bain & Company.

Value grew 2.7 per cent in the first quarter from a year earlier, as festive spending helped fuel a 5.3 per cent gain in volume, the firm said in a market research report published last week. The average selling price fell 2.5 per cent, following a 3.4 per cent slide in 2024 that was the worst in four years, it added.

Bain monitors and examines fast-moving consumer goods (FMCG) considered essential for everyday use, which families purchase regularly, within four segments: packaged foods, beverages, personal care items, and household cleaning supplies. This analysis excludes areas such as clothing, electronics, vacations, and dining out expenses.

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The direction of the market trend for 2025 remains uncertain due to ongoing deflation, as stated in the report penned by Bain’s top partners Derek Deng and Bruno Lannes along with Rachel Lee, who leads Worldpanel China as its general manager. The data shows that a shift towards more economical purchasing behaviors persisted uniformly throughout all four primary product segments.

China's macroeconomic conditions improved while consumer confidence stabilised and Beijing announced more policies to support domestic consumption and crank up growth as exports struggled amid tariff and trade barriers. The government in March unveiled a strategy to raise wages and reduce households' financial burdens.

China's Retail sales increased by 6.4 percent compared to the previous year. In May, at its quickest rate since December 2023, growth was bolstered by government stimulus initiatives and the premature onset of this year’s “618” online shopping event.

According to the report, the pricing landscape continues to be difficult, as consumers opt for more affordable options and premium fast-moving consumer goods sectors struggle to maintain or bolster their market positions. The study indicates that brands must decide whether to compete within luxury markets or focus on mass-market categories.

"Given the shopping and pricing trends, brands should carefully assess their 'where to play' options and the price segments they want to compete in," the report said. "Brands should also leverage the latest technology available, especially artificial intelligence, to create an edge."