China’s retail sales fell for the first time in more than three years in May, while urban investment contracted more than expected, signaling further weakness in the world’s second-largest economy.
Retail sales, a key gauge of consumption, dropped 0.6% year-on-year in May, the first decline since December 2022, according to data from the National Bureau of Statistics.
The figure came below market expectations for flat growth, as the Labor Day holiday failed to offset weak consumer demand.
Urban fixed-asset investment, including real estate and infrastructure, fell 4.1% in the January-May period from a year earlier, deepening from a 1.6% decline in the first four months.
Real estate investment remained a major drag, falling 16.2% in the first five months of the year. Manufacturing fixed-asset investment also contracted for the first time since December 2020, despite resilience in high-tech and policy-supported sectors.
Infrastructure investment rose 0.6% year-on-year during the same period.
Industrial production was the main bright spot, rising 4.5% in May from a year earlier, above expectations and recovering from April’s near three-year low of 4.1%.
The statistics bureau said the domestic imbalance between strong supply and weak demand remained “acute,” adding that some companies were under considerable operational pressure.
China’s unemployment rate eased to 5.1% in May from 5.2% in April. The latest figures add pressure on Beijing to introduce further policy support to stabilise consumption and investment, as the economy loses momentum after a stronger first quarter.
The easing of Middle East tensions and the reopening of the Strait of Hormuz may offer some relief by reducing energy shock risks, but analysts warn that weak domestic demand continues to weigh on China’s recovery.
China’s exports remained resilient in April and May, supported by renewables and AI-related demand, while higher commodity costs helped ease deflationary pressure.
However, consumer inflation remained modest, suggesting firms are absorbing higher input costs rather than passing them on to households amid weak pricing power.
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