China’s retail sales rose in May at the fastest pace since late 2023, while industrial production and investment posted steady gains. Analysts said the growth points to a recovery that remains on course, backed by targeted stimulus and accommodative macro policies. However, lackluster demand and external uncertainties are fueling calls for more decisive and coordinated policy support. Figures released by the National Bureau of Statistics (NBS) show that China’s retail sales, a key measure of consumer spending, grew 6.4% year-on-year in May compared with a 5.1% rise in April. “Consumers found a bit of retail therapy in May, helped along by the early start of the ‘618’ shopping festival and incentives from the government’s trade-in program,” said Louise Loo, Lead Economist at British think tank Oxford Economics. Loo said that her team believed China’s second-quarter GDP is on track for 5.2% year-on-year growth. “That is a touch higher than our current baseline, reflecting more exuberant export-front-loading and a services sector that has broadly held up. As such, we will likely nudge our forecast upward in the forthcoming forecast round.”
Loo’s views were echoed by Ming Ming, Chief Economist at CITIC Securities, who said that China’s economy is gathering further steam despite lingering external uncertainties, with more proactive and effective macro-economic policies taking hold. “Industrial output kept recovering, consumption rebounded at a faster pace, and investment in manufacturing and infrastructure remained solid, further reinforcing the foundations for economic recovery,” Ming noted. NBS data also showed that China’s value-added industrial output rose 5.8% year-on-year in May, while fixed-asset investment (FAI) increased 3.7% during the January-May period after a 4% rise in the first four months of the year.
Lu Ting, Chief China Economist at Nomura, said that the increase in retail sales and slower FAI growth underscore the shift in China’s policy focus from investment to consumption. However, he cautioned that the boost from the trade-in program may fade in the second half of this year, especially given the high base, while payback from the front-loading of exports might come after the 90-day truce period for the United States-China trade dispute ends. For China to achieve its annual growth target of around 5% this year requires the rolling out of a sizable stimulus package, he said, as reported by the China Daily.
