If consumer spending improves as expected, it is recommended to focus on the performance elasticity of related brands and manufacturing leaders. Although the forms of consumer stimulus policies in the United States and China are different, the logic of end consumer behavior is similar, and the situation in the United States may be instructive.
The main points are as follows:
Policy Overview: The consumer stimulus model is the issuance of checks, totaling three rounds of $867 billion, which is about 4% of the US GDP.
Starting from the outbreak of the pandemic in 2020, the United States conducted fiscal stimulus in March, all of which included direct cash transfers to residents, with a total scale of $867 billion, about 4% of the US GDP. The first round was in March-April 2020, with eligible families receiving $1,200 per adult and $500 per child; the second round in December 2020 increased the subsidy to $600 per adult and child; the third round in March 2021 was $1,400 per adult and child.
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From the perspective of consumer spending, durable goods > non-durable goods > services, with the peak growth occurring in the third round of cash subsidies. Although the first round of cash subsidies was issued in March-April 2020, personal consumption expenditure actually declined due to consumption scenarios and future expectations. As the second and third rounds of cash subsidies were issued and the epidemic prevention path became clear, consumer spending began to show, with durable goods consumption increasing by 20% year-on-year during the second round, and by 80% year-on-year in the third round. Due to the limited scenarios during the pandemic, durable goods performed significantly better than non-durable goods and services.
Textile and Apparel: Affected by the shift in demand, the stimulus of consumer spending is mainly reflected in the third round.
Due to the weak demand for clothing during the home office in 2020, the sales growth rate was still negative after the first round of subsidies from April to December 2020, but there was a noticeable improvement on a quarter-on-quarter basis; in 2021, as offline activities resumed and the demand for clothing increased, the clothing sales significantly improved after the third round of subsidies, with the first positive growth rate since the pandemic achieved in March 2021.
Referring to Adidas's performance and valuation, benefiting from the implementation of economic stimulus and the expectation of a new round of cash subsidies, it achieved a turnaround from loss to profit in 20Q3. Coupled with the catalyst of economic stimulus policies on expectations, the company's valuation reached a stage high in 2020Q4. In 2021Q3, benefiting from the concentrated release of consumer spending, the performance reached a stage high, but the valuation began to decline.
Light Industry Manufacturing: Midstream manufacturing benefits from early restocking & global supply chain layout, with high performance elasticity and fast transmission rhythm.
Elasticity: Midstream manufacturing > downstream channels > terminal sales. Midstream manufacturing benefits from the advantages of the global supply chain, the increase in manufacturing share, coupled with downstream restocking channels, the performance elasticity is greater than downstream channels and terminal sales.Rhythm: Midstream manufacturing = downstream channels > terminal sales. The pandemic first impacted terminal sales scenarios, hence the growth rate of terminal sales was under pressure in 2020Q2, and then gradually increased with the release of consumer spending; leading channels have stronger operational stability, so they benefited from consumer stimulation in 2020Q2 and then performed steadily. Midstream manufacturing benefited early from downstream restocking, and the global supply chain drove market share growth, hence the performance growth rate increased from 2020Q2.
