China's May Retail Sales Expected to Post First YoY Decline Since Post-COVID Recovery
Claire Weston
A Bloomberg survey forecasts China's May retail sales fell 0.2% year-on-year — the first monthly decline since Covid controls ended in late 2022, signaling a real deterioration in domestic spending momentum and raising the stakes for policy support in the second half.
Why did retail suddenly turn negative?
The immediate trigger: trade-in subsidies rolled back. Those subsidies had pulled forward purchases of appliances and cars, creating a high base.
May car sales plunged over 22% year-on-year, marking six straight months of double-digit declines. This means → once the subsidies expired, the demand they had front-loaded vanished with them.
Even though total tourism spending rose over the May Day holiday, per-capita spending was flat and still below 2019 levels. In plain terms = more people went out, but each person spent no more than before.
How bad are the investment numbers?
Bloomberg-compiled forecasts show fixed-asset investment in the first five months fell roughly 2.3% year-on-year in cumulative terms.
Goldman Sachs chief China economist Andrew Tilton's team estimates the May single-month decline at about 7%, narrowing slightly from April's 8.2%.
Part of the weakness is attributed to extreme weather and slower government-bond issuance. This means → the investment slowdown is not purely a demand story — fiscal funds arriving late are also dragging.
Will growth fall below the official target?
Some analysts estimate China's growth had already slowed to roughly 4% in April, below the lower end of the government's full-year 4.5%–5% target range.
ING chief Greater China economist Song Lin said: "Weak domestic activity data will likely point to further deceleration in Q2, even though external demand remains strong."
This reflects an awkward split: exports are still holding up, but domestic demand is pulling overall growth down.
What external risks are closing in?
Middle East tensions are pushing energy prices higher. If businesses pass costs to consumers, that would further squeeze already fragile spending willingness.
Major global central banks are pivoting to rate hikes on the oil-price shock, while China's next likely move is a rate cut — but economists widely expect it to be delayed until late this year or even 2027.
In plain terms = the world is tightening while China wants to ease, but the window for easing is being compressed by the external environment.
What can stabilize consumption?
ANZ economist Raymond Yeung and colleagues note that households continue to deleverage — deleveraging means households are actively paying down debt rather than borrowing — with both short- and long-term loans recording net repayments in May and bank lending to households contracting for a second straight month.
This means → consumers are repaying debt, not borrowing to spend. Monetary easing alone is unlikely to revive consumption directly.
Authorities have recently accelerated issuance of special-purpose bonds — earmarked local-government debt funding infrastructure and targeted investment. Whether that spending transmits effectively into investment and consumption is the key variable for the second-half economic trajectory.
Content is for reference only, not financial advice.