China’s retail sales grew 6.4% year-on-year in May, the National Bureau of Statistics reported on Monday. This rise was partly driven by discount campaigns on stranded inventory after some cargo suspensions tied to higher U.S. tariffs. Major online shopping events also boosted spending. The annual “6.18” festival, launched by e-commerce platforms, saw sellers heavily discount household goods.
Factory Output Growth Slows Amid Tariff Headwinds
Manufacturing output expanded 5.8% in May compared to a year earlier, down from 6.1% in April and 7.7% in March. Activity had surged earlier in the year but decelerated as U.S. President Trump’s tariffs took effect. Although some planned tariff hikes have been delayed during ongoing trade negotiations, factory production remains under pressure.
Exports to U.S. Plunge, Overall Exports Underperform
China’s exports to the United States fell 35% year-on-year in May. Total exports rose 4.8%, well below economists’ expectations and down sharply from 8.1% growth in April. Rising tariffs continue to weigh on cross-border trade, despite talks aimed at a deal before the August 10 deadline.
Real Estate Downturn and Deflation Concerns Persist
Weakness in the property sector remains a drag on the economy. Real estate investment dropped 10.7% in the first five months of the year, and housing prices edged down in most cities. Deflation also persists: consumer prices fell 0.1% year-on-year and 0.2% month-on-month in May.
Fixed-Asset Investment Slows
Spending on factory equipment and other fixed assets rose just 3.7% in the January-May period. This modest gain highlights firms’ caution on long-term capital projects amid global trade uncertainty.
Government Stimulus Boosts Consumption
Beyond e-commerce festivals, Beijing’s subsidy programs for trading in old appliances, cars, and other goods provided additional support for retail sales. These measures aim to shore up consumer confidence as real-estate driven wealth remains subdued.
Economic Outlook Hinges on Trade Talks and Confidence
Economists say the data show China has weathered tariff pressures reasonably well, but sustainable growth needs firmer consumer confidence. ING economist Lynn Song noted that while retail sales rose 5% in the first five months, confidence remains near historical lows. Capital Economics’ Huang Zichun warned that export growth may slow further if high tariffs and broad export restrictions persist.
With both sides racing to finalize a deal by August 10, the path to more robust growth will depend on trade outcomes and a rebound in domestic demand.
