China’s retail sales decline for first time in over three years

China’s retail sales declined for the first time in more than three years in May, highlighting growing strains on domestic demand even as industrial output exceeded expectations and exports remained resilient.

According to data released by the National Bureau of Statistics on Tuesday, China’s retail sales, a key measure of consumer spending, fell by 0.6 per cent in May compared to the same month last year, marking the first decline since December 2022.

The drop came despite the Labor Day holiday at the beginning of May, which failed to boost consumer spending. Beijing had also reduced trade-in subsidies earlier this year, adding to the slowdown in consumption.

The decline surprised economists, as a Reuters survey had predicted that retail sales would remain unchanged. National Bureau of Statistics spokesperson Fu Linghui said that combined retail sales of goods and services still recorded a modest 2.8 per cent increase during the first five months of the year.

China economy weakens further in May as retail sales post first drop in over three years https://t.co/28lPlBTCja

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China’s urban fixed-asset investment, which includes spending on real estate and infrastructure projects, fell 4.1 per cent in the January-to-May period compared with a year earlier. The decline was worse than economists’ expectations of a 2 per cent drop and deeper than the 1.6 per cent decrease recorded during the first four months of the year.

The property sector remained a major drag on investment, with real estate investment dropping 16.2 per cent during the first five months of the year. Manufacturing fixed-asset investment also declined for the first time since December 2020, according to Wind data, despite continued strength in high-tech and government-supported manufacturing sectors. Meanwhile, infrastructure investment rose by 0.6 per cent from a year earlier.

Industrial output was the only positive indicator, increasing by 4.5 per cent in May. The figure exceeded market expectations of 4.3 per cent growth and improved from April’s 4.1 per cent growth, which had been close to a three-year low.

China’s statistics bureau has said that the imbalance between strong supply and weak demand in the economy is becoming serious, adding that many companies are under significant operational pressure. It called for the development of new technologies, along with stronger employment support, to ensure a suitable rise in economic output.

The remarks come as the economy shows signs of slowing after a strong first quarter. Growth weakened across several areas in April, with both industrial production and retail sales posting their slowest increases in years. In May, the official manufacturing purchasing managers’ index fell to 50, which marks the boundary between expansion and contraction.

Although the early May holiday period supported travel and restaurant activity, overall consumer spending per person was lower than in the same period in 2025, as people became more careful with their spending.

Economist Zhiwei Zhang of Pinpoint Asset Management said the weak retail sales data increases pressure on the government to introduce measures to support consumption. He expects policy adjustments in July after the release of second-quarter GDP figures.

Meanwhile, China’s unemployment rate improved slightly, falling to 5.1% in May from 5.2% in April.