By Joe Cash and Ellen Zhang
BEIJING (Reuters) -China’s factory output growth hit a six-month low in May, while retail sales picked up steam, offering temporary relief for the world’s second-largest economy amid a fragile truce in its trade war with the United States.
The mixed data comes as China’s economy strains under U.S. President Donald Trump’s tariff onslaught and chronic weakness in the property sector, with entrenched home price declines showing no signs of reversing.
Industrial output grew 5.8% from a year earlier, National Bureau of Statistics data showed on Monday, slowing from 6.1% in April and missing expectations for a 5.9% rise in a Reuters poll of analysts. It was the slowest growth since November last year.
However, retail sales rose 6.4%, much quicker than a 5.1% increase in April and forecasts for a 5.0% expansion, marking the fastest growth since December 2023.
All up, the numbers failed to convince investors or analysts that anaemic growth would pick up anytime soon with Chinese blue chips erasing very brief gains on Monday.
“The U.S.-China trade truce was not enough to prevent a broader loss of economic momentum last month,” Zichun Huang, China Economist at Capital Economics, said. “With tariffs set to remain high, fiscal support waning and structural headwinds persisting, growth is likely to slow further this year.”
Data released earlier this month showed China’s total exports expanded 4.8% in May, but outbound shipments to the U.S. plunged 34.5%, the sharpest drop since February 2020.
The Asian giant’s deflationary pressures also deepened last month.
Supporting retail sales were strong Labour Day holiday spending and a consumer goods trade-in programme that was heavily subsidised by the government.
An extended “618” shopping festival, one of China’s largest online retail events by sales, started earlier than usual this year, helping lift consumption.
CAUTION AHEAD
Overhanging the activity indicators were persistent headwinds in China’s housing sector, with new home prices extending two years of stagnation.
“We find a general pattern that wherever there is stimulus, it works, like the home appliance sales; but wherever there is no stimulus, like the property development, it struggles,” said Tianchen Xu, senior economist at the Economist Intelligence Unit.
“There are reasons for more caution going forward, especially regarding private consumption which could see a ‘triple whammy’ of tightening dining curbs on officials, the end of a front-loaded 618 shopping festival and the suspension of government consumer subsidies.”
