The world’s largest luxury fashion houses have taken a tumble as fears mount over a spending slowdown in China.
Shares in Richemont, the owner of Cartier, fell more than 9pc to their lowest level in more than five months, while luxury giant LVMH – which owns Louis Vuitton and Christian Dior – slipped by around 4pc.
It came amid concerns of a slowdown in spending among Chinese shoppers, as official growth figures showed the world’s second-largest economy grew by just 0.8pc in the three months to June, following an expansion of 2.2pc in the previous quarter.
The figure was ahead of economists’ expectations of a 0.5pc increase, but on an annual basis its expansion of 6.3pc was well below the forecast for growth of 7.3pc.
Economists said the recovery was heading “from bad to worse” since lifting zero-Covid measures, warning that China’s 5pc economic growth target for this year was now at risk.
Moody’s Analytics economist Harry Murphy Cruise said the numbers were a “worrying result” for China’s economy.
He added: “China’s recovery is going from bad to worse. After a sugar injection in the opening months of 2023, the pandemic hangover is plaguing China’s recovery.”
Hopes of a sharp recovery in luxury sales in the wake of Covid restrictions lifting had propelled LVMH to become the first European company to be worth $500bn (£382bn) in April. However, it has since dipped from that level, and is now valued at around $485bn.
Luxury brands have also been contending with softer demand in another of their major markets in recent months. Richemont on Monday pointed to pressure in the US, which weighed on sales in the three months to the end of June. In its Americas region, it said sales were down 2pc on a constant current basis.
It follows comments from LVMH in April suggesting rising interest rates were starting to hit spending in the US. Outside of its beauty brand Sephora – where prices tend to be lower than its other higher-end divisions – LVMH finance chief Jean-Jacques Guiony said business was slowing.
Meanwhile, Burberry interim chief financial officer Ian Brimicombe last week said the US was “generally slow at the moment”. He added: “Obviously they’ve got some macroeconomic headwinds to deal with.”
He added that Chinese tourists were also yet to return abroad in the same numbers as before the pandemic. “I think there are still issues with them getting visas and flight capacity, so we’re quite prudent in terms of the rate at which the Chinese tourists are recovering.”
Separate data released by the National Bureau of Statistics also showed youth unemployment climbed to 21.3pc in June from 20.8pc in May, a new high as graduates scrambled for limited offers during the job hunting season.
Economists also warned that Chinese households continued to stash savings away at “concerning” rates.
Official data showed urban households saved around 40pc of their disposable income, well above the pre-pandemic rate of 36.4pc.
Xiangrong Yu, chief China economist at Citi, said: “With households’ saving rate still elevated six months after reopening, it seems weak household confidence is very entrenched. It is no surprise that youth unemployment reached a new record high.”
There are around 3 million more unemployed 16-24 year-olds now relative to pre-Covid.
Analysts have partly blamed Xi Jinping’s tighter regulatory grip on China’s tech sector for the increase. Goldman Sachs warned the crackdown could result in a permanent increase in joblessness.
Previous analysis by the Wall Street giant showed that close to 20pc of 16-24 year old workers work in “regulation related” sectors, such as education, IT, and the country’s crisis-hit property sector.
“Regulatory tightening in recent years might imply slower growth of these sub-sectors and thus contribute to structurally higher unemployment rates among the young generation,” it said in a client note.
China’s property sector, which accounts for about a quarter of the economy, remains firmly in a downtrend, with new home prices for June stalling.
Property investment slumped 20.6pc in June year-on-year after a 21.5pc drop in May.
Students are also choosing subjects where there is little demand from employers, with the number of graduates who studied education and sports climbing by more than 20pc in 2021 relative to 2018, even as hiring demand “weakened materially” over the same period, according to Goldman.
It also expects a “surge” in the number of youths out of work that could push up unemployment by up to four percentage points this summer as more fresh graduates face a summer of joblessness.
