The recent data suggest that China’s households are increasingly reluctant to spend. Real retail sales growth slumped to a five-year low in the first two months of 2011. Other measures of household spending have been much weaker than the retail sales figures for a while. Consumer confidence is as depressed as it has ever been and depositors overwhelmingly say they would prefer to add to their savings or investments, if they had extra money, rather than spend more. All this may change once inflation falls. If it doesn’t, there is no chance of China being able to rebalance its economy while maintaining rapid GDP growth.