The National Bureau of Statistics revealed on Monday that retail sales in China experienced a significant surge in May, marking the highest growth rate since late 2023, aided by extended holiday periods for Labor Day and Dragon Boat Festival.
During the month, retail sales increased by 6.4% compared to the previous year, surpassing analysts’ projections of 5% growth as predicted in a Reuters poll. This figure also represented an uptick from April’s 5.1% growth.
Meanwhile, the growth of industrial output slowed to 5.8% year on year in May, down from 6.1% in April, and slightly missing analysts’ expectations of a 5.9% increase.
On a year-to-date basis, fixed-asset investment grew by 3.7% as of May, falling short of the 3.9% growth forecasted by Reuters and down from a 4% increase in the preceding months.
Notably, the contraction in property investment intensified, dropping by 10.7% in the first five months of the year, according to government statistics.
The urban unemployment rate for May was recorded at 5.0%, down from 5.1% in April, representing the lowest level since November of the previous year.
“The unexpected rise in retail sales can likely be attributed to the continuing impact of consumer goods trade-in programs,” stated Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. He added, however, that declining property prices could negatively affect consumer sentiment.
A separate report released Monday by the NBS highlighted that new home prices in affluent tier 1 cities continued their decline, decreasing by 1.7% in May compared to a year earlier, while tier 2 and tier 3 cities saw drops of 3.5% and 4.9%, respectively.
In mid-May, a tariff agreement reached between Beijing and Washington provided temporary relief to China’s exporters, prompting some companies to hasten shipments and explore alternative markets. A 90-day truce was established to reduce many of the triple-digit tariffs imposed on each other’s goods in early April.
Commerce Secretary Howard Lutnick mentioned in an interview with Finance Newso last week that U.S. tariffs on imports from China would remain at a level of 55%.
Despite overall positive trends, China’s exports in May grew at a slower pace than anticipated. Nevertheless, significant increases in shipments to Southeast Asian countries, European Union nations, and Africa were noted, which helped mitigate the substantial decline of over 34% in exports to the U.S., marking the steepest drop since February 2020.
Recent trade data over the past two months suggested that China’s export sector has demonstrated unexpected resilience, as noted by Goldman Sachs, which stated that “bilateral tariffs have not significantly impacted total Chinese exports.”
The main concern for Chinese policymakers appears to be sluggish domestic demand, as consumer prices have recorded a year-on-year decline for four consecutive months, with an overall fall of 0.1% in May. Additionally, deflation among factory-gate or producer prices worsened, decreasing by 3.3% compared to the previous year.
However, with exports showing resilience and GDP growth projected to exceed 5% in the first half of the year, it seems that Beijing may not feel an urgent need to implement further easing measures, according to Goldman Sachs.
