China May Retail Sales Fall 0.6%, First Drop Since 2022

China's retail sales fell 0.6% in May from a year earlier, the first year-on-year decline since early 2022, as industrial production accelerated and fixed-asset investment weakened sharply.

Factory output grew 4.5% year-on-year, up from 4.1% in April and above the 4.2% consensus forecast, according to the National Bureau of Statistics. The production side of the economy continued to expand while household and investment demand contracted.

Retail sales dropped to -0.6% year-on-year from 0.2% in April. It was the first outright decline since the Covid-era lockdowns of 2022. The bureau did not attribute the drop to a specific cause.

Fixed-asset investment fell 4.1% year-to-date year-on-year, compared with a 1.6% decline through April. That acceleration in the pace of contraction reflects broad-based weakness across real estate and infrastructure projects. Manufacturing investment also turned negative for the first time since late 2020.

Real estate investment inflows dropped 16.2% in the first five months, extending a multi-year slump. Manufacturing investment slipped into contraction, the bureau said. Infrastructure spending declined.

The National Bureau of Statistics described the gap between expanding industrial production and shrinking demand as "acute." The wording was more direct than its usual cautious statements.

Manufacturing investment slipped into contraction for the first time since late 2020.