China’s retail sales fall for first time since 2022 as domestic demand weakens

China’s retail sales fell 0.6% year-on-year in May, the first decline in over three years, as the National Bureau of Statistics (NBS) reported weaker-than-expected consumer spending. The drop reversed April’s 0.2% growth and fell short of economists’ forecasts for flat growth, signaling persistent weakness in domestic demand. Industrial output rose 4.5% year-on-year, outperforming expectations of 4.3% and accelerating from April’s 4.1% growth, driven by AI-related global investments. Exports surged 19.4%, though overseas demand has yet to boost household spending, which remains subdued amid soft consumer confidence and job insecurity. Automobile sales declined for an eighth consecutive month, reflecting cautious spending on major purchases. The five-day Labour Day holiday failed to stimulate consumption, and Beijing’s trade-in program for consumer goods lost its earlier impact. Fixed-asset investment fell 4.1% in the first five months, worsening from a 1.6% decline in January-April, while property investment dropped 16.2%, accelerating from a 13.7% decline in the first four months. New home prices continued to fall, with monthly declines accelerating in May. Household borrowing remained weak as consumers avoided mortgages due to uncertain employment and income growth. Factory-gate inflation hit its highest level since July 2022, but consumer inflation stayed stagnant, highlighting an economic imbalance between supply and demand. The unemployment rate eased slightly to 5.1% in May from 5.2% in April, though concerns over job security and AI’s employment impact continue to dampen consumer sentiment. The latest data increase pressure on policymakers to introduce measures supporting household spending and stabilizing the property market.