China retail sales fell in May for first time since 2022

Car sales fell 22.3% year-on-year in May in China, new figures show today China's retail sales fell last month for the first time in more than three years, data showed today, as leaders of the world's second-largest economy struggle to kickstart domestic consumer activity. The 0.6% year-on-year drop in May, revealed by the National Bureau of Statistics, was a big miss compared with the 0.2% forecast in a Bloomberg survey, which was itself in line with April's lacklustre performance. While the Chinese economy has enjoyed a historic boom in exports, it has been dragged for years by weak household consumption that has so far failed to recover from the Covid pandemic. Beijing is targeting overall growth of 4.5-5% this year, though soaring energy costs and uncertainty caused by the Middle East crisis have complicated matters. NBS spokesperson Fu Linghui acknowledged in a news conference a "complex and volatile international environment" and domestic "high temperatures and heavy rainfall... that disrupted market supply and demand". The sales slump - the first since December 2022 - was caused in large part by lower purchases of big-ticket items such as cars, home appliances and furniture. Auto sales fell 22.3% year-on-year in May, data from the China Passenger Car Association showed last week. Leaders have also been battling a persistent slump in the property sector, a once-booming industry that previously fuelled national growth and provided a key store of wealth for consumers. New home prices fell last month in 67 out of 70 major cities surveyed, according to NBS data today. Policy 'fine-tuning' Industrial production rose 4.5% on-year last month, separate figures from the bureau showed, an improvement from April's 4.1%, which had been the slowest growth in nearly three years. But in another gloomy sign, fixed-asset investment slid 4.1% year-on-year in January-May, a significant widening from the 1.6% drop in January-April. Domestic demand remains lacklustre while industrial production is still sluggish, wrote Julian Evans-Pritchard from Capital Economics in a note. "All told, the May data suggest that the economy is still struggling, though we expect strong exports to provide a prop to gross domestic product growth this year," he said. Weak retail sales data will put pressure on the government to consider policy measures to stabilise consumption, said Zhiwei Zhang of Pinpoint Asset Management. More policy "fine-tuning" will likely come in July after second-quarter GDP data is released, Zhang added. Chinese exports surged almost a fifth in May, figures showed last week, marking a bright spot for the Chinese leadership as it struggles to kickstart growth while navigating trade frictions with the US. The 19.4% year-on-year jump in overseas shipments was driven largely by artificial intelligence and auto exports, the General Administration of Customs said, and topped the 15% forecast in a Bloomberg survey of economists. "The export boom can help to mitigate the weak domestic demand in the short term," Zhang said. "But given the size of China's economy, strong export growth will likely lead to tension with the trading partners," he added.