China May Retail Sales Surpass Expectations, Industrial Output and Investment Fall Short

18 Jun, 2024

China May Retail Sales Surpass Expectations, Industrial Output and Investment Fall Short

China’s retail sales exceeded expectations in May, showing a 3.7% increase compared to the same period last year. This growth surpassed the 3% rise predicted by a Reuters poll of economists. However, other economic indicators such as industrial output and fixed asset investment did not meet the forecasts.

Industrial output grew by 5.6% year-on-year, which was less than the anticipated 6% increase. Fixed asset investment saw a 4% rise, slightly below the 4.2% that was forecasted.

According to the National Bureau of Statistics, the total retail sales of consumer goods reached 3.92 trillion yuan ($540.32 billion). Sales in urban areas grew by 3.7% year-on-year, while sales in rural areas increased by 4.1%. The shortfall in fixed asset investment was partly due to a sharper decline in real estate investment. When real estate is excluded, fixed asset investment was up by 8.6% compared to May of last year.

The urban unemployment rate remained steady at 5% in May, the same as in April, and was 0.2 percentage points lower than in May of the previous year. Exports rose by 7.6% year-on-year in May, in U.S. dollar terms, exceeding the Reuters forecast of a 6% increase. Imports, however, grew by only 1.8%, falling short of expectations.

Data released on Friday showed that the demand for loans continued to be weak. Outstanding yuan loans grew by 9.3% in May compared to a year ago, marking the slowest increase since 1978. The M1 money supply, which includes cash in circulation and demand deposits, decreased by 4.2% year-on-year in May, the largest drop since 1986.

Analysts from Goldman Sachs noted that a state media outlet linked to China’s central bank attributed the decline in M1 growth to a crackdown on fraudulent loans and outflows related to wealth management products. Inflation data for May revealed that consumer prices, excluding food and energy, increased by 0.6% from the previous year.