China's retail sales dropped 0.6 percent in May compared to the same month last year, marking the first year-over-year decline in more than three years. The figure fell short of economist expectations, which had projected a 0.2 percent decline. The drop signals continued weakness in the world's second-largest economy as consumer spending contracts.
The decline represents a sharp reversal for Chinese consumer activity, which had shown resilience through much of the post-pandemic period. The last time China recorded a year-over-year drop in retail sales was during the strict pandemic lockdowns that characterized 2023. The May figure covers total retail sales of social consumer goods, a key measure of domestic consumption that includes both goods and services.
Despite the monthly decline, China reported that retail sales of goods and services increased 2.8 percent during the first five months of the year combined. This suggests that earlier months showed stronger performance before the May downturn. The mixed signals reflect ongoing uncertainty in China's economic recovery as the government works to stimulate domestic demand.
The weaker-than-expected retail sales data comes as Chinese authorities face mounting pressure to support economic growth. Consumer spending has been a particular concern for policymakers, who have introduced various measures to encourage household consumption. The May figures indicate these efforts have not yet gained sufficient traction to prevent a contraction in retail activity.
The retail sales decline adds to a broader picture of economic challenges facing China. Weak consumer confidence, a struggling property sector, and subdued business investment have all weighed on growth prospects. Economists will be watching closely to see whether the May drop represents a temporary setback or the start of a more sustained period of consumer weakness.