China’s retail sales declined in May for the first time in more than three years, underscoring persistent weakness in domestic consumption despite strong export growth and ongoing government efforts to support economic recovery.
Data released by the National Bureau of Statistics (NBS) on Tuesday (16 June) showed retail sales fell 0.6 percent year on year in May, marking the first contraction since December 2022.
The decline was significantly worse than economists’ expectations of a 0.2 percent increase and followed April’s subdued performance.
The latest figures highlight the challenges facing policymakers as they seek to revive household spending, which has remained weak since the Covid-19 pandemic despite a broader recovery in other parts of the economy.
China has set a growth target of 4.5 to 5.0 percent for 2026. However, rising energy costs, uncertainty stemming from the Middle East crisis and continued weakness in the property market have complicated the economic outlook.
NBS spokesperson Fu Linghui said the economy continues to face a “complex and volatile international environment,” while domestic factors, including high temperatures and heavy rainfall, disrupted market supply and demand during the month.
The decline in retail sales was largely driven by weaker purchases of big-ticket consumer goods. Sales of automobiles, home appliances and furniture all recorded significant declines. According to the China Passenger Car Association, auto sales dropped 22.3 percent year on year in May.
China’s property sector, which has long been a key driver of economic growth and household wealth, also remained under pressure. Official data showed new home prices fell in 67 of the country’s 70 major cities last month, indicating that the housing market downturn has yet to stabilize.
Industrial production provided a modest bright spot, rising 4.5 percent year on year in May compared with 4.1 percent growth in April, which had been the slowest pace in nearly three years.
However, fixed-asset investment fell 4.1 percent during the January-May period from a year earlier, widening significantly from the 1.6 percent decline recorded during the first four months of the year.
Economists believe the weak retail sales figures could increase pressure on Beijing to introduce additional measures to support consumer spending. Zhiwei Zhang of Pinpoint Asset Management said further policy fine-tuning is likely after the release of second-quarter GDP data in July.
Meanwhile, exports continued to provide a major source of support for the economy. China’s overseas shipments surged 19.4 percent year on year in May, exceeding market expectations and reflecting strong demand for products related to artificial intelligence and automobiles.
While robust exports are helping offset weak domestic demand in the short term, analysts cautioned that sustained export growth could heighten trade tensions with major trading partners, particularly the United States.
The contrasting trends of weakening consumer spending and strong export performance highlight the uneven nature of China’s economic recovery as policymakers seek to balance growth, consumption and external trade challenges.
