[BEIJING] China’s longest stock rally in years has done little so far to encourage households to shell out more money during a major holiday this month, a worry for an economy already entering a slowdown.

After the summer ended with two of the weakest months for retail sales this year, preliminary figures showed consumer demand cooling further during the eight-day Golden Week that started Oct 1. Sales at key retailers and restaurants grew just 3.3 per cent during the first four days of the holiday, according to the Commerce Ministry, nearly half the growth pace seen during the Labor Day break in May.

Average passenger traffic for all travellers was up almost 7 per cent year on year in the first seven days, according to a Bloomberg tally of the Ministry of Transport’s data. That was also a decline from the 8 per cent surge during the five-day Labor Day holiday.

Chinese stocks had their fifth straight month of gains in September – the best run since 2018 – raising the prospect that consumption would benefit from a so-called wealth effect when people feel richer in a booming market. But with equities only accounting for a fraction of household wealth, the improved sentiment around Chinese assets has yet to translate into stronger spending by shoppers.

Holiday activities are “back to normal but largely lukewarm,” Citigroup economists including Yu Xiangrong said in a note on Tuesday (Oct 7). “New growth momentum, however, was muted. And we see limited evidence for the ‘wealth effect’ from the equity rally.”

Officials have made boosting consumer spending a policy priority this year, and have looked to nurture the stock market as a reliable source of profit for households and funding for Beijing’s tech ambitions.

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A greater emphasis on consumption is expected to feature prominently in China’s next five-year plan, which is set to be reviewed at a party conclave later in October.

A long run of steady gains for equities could draw more people into the market, helping stabilise public confidence and creating another stream of income at a time when jobs prospects dim.

But relative restraint by consumers during one of the biggest national holidays of the year suggests a turnaround in sentiment is still a ways off, especially as the property market remains in distress.

“We have seen overall relatively soft mobility and consumption activities,” Lu Ting, chief China economist at Nomura Holdings, wrote in a note on Monday. Given the holiday in 2025 is a day longer than last year’s break, he said “actual consumption growth could be even weaker than the data suggest.”

“We expect the wealth effect to be limited and consumption to remain tepid for the remainder of the year,” Lu added. BLOOMBERG