China’s latest economic data for May paints a mixed picture. Industrial production rose 5.8% yoy, falling short of the expected 6.0% and reflecting lingering weakness in external demand. This comes on the heels of a sharp -34.5% yoy drop in exports to the US, despite the mid-May rollback of some tariffs. The full impact of reduced tariffs is expected to emerge more clearly in June though.
In contrast, retail sales provided a bright spot, jumping 6.4% yoy and beating forecasts of 5.0% yoy. The rebound was supported by the government’s aggressive push to boost consumer spending through its appliance and vehicle trade-in program. The Ministry of Commerce reported that the campaign has already generated over CNY 1.1m in sales this year.
However, fixed asset investment remains a drag, growing only 3.7% ytd yoy versus expectations of 3.9%. The persistent weakness in property investment, down 10.7% in the first five months of the year, highlights ongoing strain in the real estate sector.
