China’s consumer spending slowdown deepened in May as retail sales unexpectedly fell from a year earlier, in the latest sign that the country’s housing market crash has left millions of families reluctant to spend.
Retail sales dropped 0.6 percent in May from the same month a year earlier, the National Bureau of Statistics said on Tuesday. It was the first year-over-year decline since December 2022, when a wave of coronavirus infections swept the country and kept consumers at home after Beijing abruptly dismantled its stringent “Covid zero” restrictions.
Last month’s decline was a surprise because higher energy costs were expected to help lift retail sales. Gasoline sales, which are included in the retail sales figures, have risen as fuel costs increased following the closure of the Strait of Hormuz, and the retail sales figures are not adjusted for inflation. Yet retail sales still fell. After accounting for rising consumer prices, the decline in spending would have been steeper.
Weak demand at home has prompted companies across China to push harder into overseas markets. Exports hit a record in April and then climbed even higher in May to $376.8 billion, according to data released last week by China’s General Administration of Customs. Industrial production also strengthened in May, driven in part by especially strong output of electric cars and other high-tech products.
“China’s supply side remains relatively strong: Exports are growing rapidly, industrial production is holding up well, and high-tech sectors continue to expand,” said Zhu Tian, an economics professor at the China Europe International Business School in Shanghai. “However, domestic demand remains weak.”
Investment in China fell in May even after excluding the deeply troubled real estate sector, as companies saw few opportunities for profitable expansion. Investment by private sector companies was particularly weak.
