People experience virtual reality (VR) equipment in a cultural center in Hefei, East China's Anhui Province on February 20, 2024. The center closely links traditional Chinese culture with VR technology, with functions such as the metaverse experience and VR consumption that meet the local public's demand for experience in emerging consumption modes. Photo: VCG

China's first-quarter retail sales jumped 4.7 percent year-on-year to 12.03 trillion yuan ($1.66 trillion), the National Bureau of Statistics (NBS) announced on Tuesday, underscoring stable consumption expansion after a surge in consumer spending during the Spring Festival holidays at the beginning of the year.

As consumer confidence continues to rebound and macro policies to shore up the market bear fruit, observers expect China's consumption recovery momentum to "strengthen moderately" throughout the year, providing new impetus to propel the world's second-largest economy to reach a GDP growth target of around 5 percent.

"The consumer market was a relatively positive area in the economy during the first quarter and there were multiple highlights.  Spending on consumer products such as food, daily necessities and some housing-related items remained stable, while holiday consumption continued to boom," Sheng Laiyun, deputy director of the NBS, said at a press briefing hosted by the State Council Information Office on Tuesday.

During the Spring Festival in February and Qingming Festival holidays in April, both the numbers of travelers and tourism revenues surpassed the levels of 2019, recording double-digit growth, according to Sheng.

Analysts expect the upcoming May Day holidays to be another "prosperous" period for consumption, giving another huge boost to GDP.

GDP grew 5.3 percent in the first quarter, well above market expectations, signaling that China is getting off to a positive start. Consumption contributed 73.7 percent of the economic output expansion, Sheng noted. 

In March alone, retail sales rose 3.1 percent, NBS data showed, slowing by 2.4 percentage points from the first two months due to a number of factors including the high base effect and flat real estate sales. 

Retail sales excluding vehicles were up 3.9 percent year-on-year in March, according to the NBS data.

"Retail spending maintained expansion in the first quarter and the level of growth was in line with market expectations. It shows that consumers' confidence and their willingness to spend could be gradually recovering, though property sales remain a drag," Zhou Maohua, a macroeconomist at China Everbright Bank, told the Global Times on Tuesday.

In March 2023, retail sales jumped 10.6 percent year-on-year as consumers released pent-up demand after the optimization of the COVID-19 management policies. Retail sales also recorded double-digit growth in April and May in 2023.

Taking account of the high base effect, it is expected that consumer spending will stage only a moderate expansion in the second quarter, but it's likely to accelerate in the second half. Observers and Chinese officials also voiced their confidence that there will be more drivers for China's consumption dynamics throughout the year.

Sheng noted that while personal incomes, which support consumption, were affected by several years of COVID-19's impact and consumer confidence was still below the threshold, favorable conditions for consumption have been amassing. 

"In the next stage, the effects of the holiday economy will become more apparent, boosting the economy and sustaining the recovery momentum," Sheng said.

Zhou noted that with stable employment and obvious increases in personal incomes, the rebound of consumer confidence is set to speed up in the following months.

Sheng also highlighted policies including plans to promote large-scale equipment upgrades and replacement of old consumer goods with new ones, which he said are set to have a "positive influence" on the growth of relevant industries.

Zheng Shanjie, head of the National Development and Reform Commission, said at a previous press briefing that large-scale equipment upgrade initiatives could open up a market valued at 5 trillion yuan, while trade-ins of vehicles and home appliances could create a market of more than 1 trillion yuan.