China’s economy showed increasing unevenness in May, with retail sales falling for the first time in more than three years while industrial output picked up pace.
Industrial output rose 4.5 per cent in May from a year earlier, picking up from the 4.1 per cent growth recorded in April, data from the National Bureau of Statistics (NBS) showed on Tuesday. The reading beat expectations of a 4.3 per cent increase in a Reuters poll.
A surge in global AI investment has helped the world’s biggest manufacturer offset the export hit many had expected from the Middle East turmoil, but a 19.4 per cent export gain has yet to filter through to domestic consumption.
Retail sales, a key gauge of consumption, slid 0.6 per cent in May, reversing April’s 0.2 per cent rise and below the estimated 0.0 per cent. It was the first monthly fall since December 2022.
That fragility was evident in the auto sector. A downturn in domestic car sales extended into an eighth consecutive month in May, underscoring softening demand in the world’s largest auto market, where pressure is likely to persist through the rest of the year.
Even the five-day Labour Day holiday failed to lift consumer activities, with the impact of the government’s consumer-goods trade-in scheme fading gradually.
Tuesday’s data highlight a two-speed growth pattern in China’s economy, with the export sector showing stellar performance but domestic demand worsening amid a multi-year property downturn.
Price data also pointed to imbalances in the growth. The widening gap between factory-gate inflation, which rose to its highest level since July 2022, and stagnant consumer inflation suggests demand has yet to keep pace with supply-side growth.
Investment was much weaker than expected. Fixed-asset investment fell 4.1 per cent in the first five months of 2025, following a 1.6 per cent decline in the January-April period. Economists had expected a 2.0 per cent fall.
Property investment extended its decline in the first five months, dropping 16.2 per cent compared with the same period last year after falling 13.7 per cent in January-to-April. On a month-on-month basis, new home prices fell at a slightly faster pace in May.
Weak household loan data released last week suggested that people remain wary of borrowing to buy houses amid sluggish income growth and job insecurity.
The nation-wide survey-based jobless rate eased to 5.1 per cent from April’s 5.2 per cent, as fears of AI displacement caused worker anxiety.
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