China May Retail Sales Drop, First Fall Since December 2022

China's retail sales posted their first annual decline in more than two years in May, underscoring the depth of the country's consumer slump. The National Bureau of Statistics reported Tuesday that retail sales fell 0.6% from a year earlier, missing the Reuters poll consensus that called for no change. The last drop was in December 2022, during the final wave of Covid lockdowns.

Urban fixed-asset investment, covering real estate and infrastructure, contracted 4.1% through end-May from a year earlier. Economists polled by Reuters had expected a 2% decline. The pace was more than double the 1.6% drop recorded through April. Real estate investment fell 16.2% in the January-to-May period, data from Wind showed. Manufacturing fixed-asset investment also turned negative for the first time since December 2020. Infrastructure investment eked out a 0.6% gain.

The divergence between production and consumption was the headline of the month. Industrial output rose 4.5% in May, topping the 4.3% estimate and recovering from April's near-three-year low of 4.1%. The official statistics bureau described the situation as "domestic imbalance between strong supply and weak demand is acute" and called for development of new technology and greater employment support to achieve "an appropriate increase in economic output."

The national unemployment rate ticked down to 5.1% from 5.2% in April.