China’s retail sales growth unexpectedly accelerated as the economy rode out the tariff rollercoaster in May, offering a confidence boost to Beijing as it stares down the threat of a prolonged trade war with the US.
Retail sales grew 6.4% last month, the fastest pace since December 2023 and exceeding all estimates, according to official data released Monday. That helped offset a mild slowdown in industrial output, which climbed 5.8% and less than the previous month as Donald Trump’s tariffs hurt demand from the world’s largest economy.
The latest snapshot of the economy offers the fullest glimpse yet into how China coped with the turmoil unleashed by Trump’s trade war. A tariff truce reached by Beijing and Washington in mid-May gave temporary relief to exports from China that would have faced duties of as much as 145% from the US.
The benchmark CSI 300 Index of onshore stocks was little changed.
China's Retail Sales Surprisingly Accelerate in May | Industrial output expansion slightly missed economists' forecast
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The unexpectedly strong consumption may give policymakers some measure of relief, although economists warn it may not represent a turnaround in sentiment.
Retail sales may have been boosted by an annual shopping festival that started earlier than usual, with online retailer JD.com’s 618 buying frenzy beginning around mid-May this year instead of end of the month in 2024.
“China’s retail sales accelerated strongly in May – on the back of Labour Day holiday, consumption subsidies and the earlier start of 618 shopping festival,” said Michelle Lam, Greater China economist at Societe Generale SA. “Still, we don’t feel confident about the pace being sustained given the weak house price data this morning, in addition to diminishing impact of subsidies without expansion or tweaks.”
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China’s new home prices fell 0.22% in May compared to the previous month, the worst drop since October.
The government, which set an ambitious economic growth target of about 5% for 2025, has previously made boosting domestic consumption a priority this year.
A key tool has been government subsidies for consumer purchases. Among products covered by the initiative, the sales of household electronics soared 53% in May from a year ago, the fastest pace on record. Receipts of mobile phones and other communication equipment also jumped 33%.
“With the effects of the policy package keeping unfolding, the efforts to stabilize economy and promote development have paid off,” the National Bureau of Statistics said in a statement accompany the data release, although it added that external uncertainties remain and there’s a need to strengthen domestic demand.
The economy’s relative strength so far this year will likely buy the government more time before it needs to deploy more support to prop up growth. China’s four-month budget deficit reached a record high — a stimulus push followed in May by the central bank’s cuts to its policy rate and the reserve requirement ratio.
The urban jobless rate was 5% in May, improving slightly from the previous month’s 5.1%. Growth in fixed-asset investment was 3.7% in the first five months of the year, slowing moderately.
The government has brought forward its sales of bonds this year, providing an early boost to infrastructure project funding. Infrastructure investment expanded 5.6% in the first five months of the year, keeping the momentum largely intact since the beginning of 2025.
