(Bloomberg) — China\u2019s consumer spending may have contracted for the first time since the pandemic, a setback that would extend a slowdown in an economy whose momentum is faltering despite booming trade.<\/p>\n
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After a surprise acceleration to start the year, the world\u2019s second-biggest economy is cooling rapidly, with investment resuming declines and consumption hobbled by a weak job market and faster inflation. Following near-zero growth in April, retail sales shrank 0.2% last month from a year earlier, according to the median estimate of economists surveyed by Bloomberg.<\/p>\n
While industrial production probably picked up slightly, the slump in fixed-asset investment likely deepened further, forecasts compiled by Bloomberg show ahead of the official release on Tuesday.<\/p>\n
Absent stronger demand at home, the economy is set to shift down a gear this quarter as it navigates the disruptions caused by the conflict in the Middle East while the government dials back spending. Although exports are proving largely immune to the upheaval in shipping and energy markets, some analysts estimate that China\u2019s growth slowed to roughly 4% in April, tracking below the government\u2019s official full-year target of 4.5% to 5%.<\/p>\n
\u201cSoft Chinese domestic activity data is likely an omen of decelerating growth in the second quarter, even as external demand remains strong,\u201d said Lynn Song, chief economist for Greater China at ING Bank NV. \u201cWhile there appears to be limited urgency for now, China still has room for monetary easing this year if it\u2019s needed.\u201d<\/p>\n
Higher energy prices stemming from the war in Iran are adding further risk to what\u2019s already a bumpy outlook, especially if companies begin to pass on more of their cost increases to consumers.<\/p>\n
But while major central banks around the world are starting to raise interest rates in response to the oil shock, China\u2019s next move is likely a cut, though it\u2019s a step economists now see delayed toward the end of this year or even into 2027.<\/p>\n
What Bloomberg Economics Says…<\/p>\n
\u201cChina\u2019s May activity report is likely to show the economy continuing to struggle, with weak domestic demand restraining an export-driven bounce in industrial output and investment extending a decline. Consumption was probably barely above last year\u2019s level.\u201d<\/p>\n
\u2014 Chang Shu and Eric Zhu. For full analysis, click here<\/p>\n
Here\u2019s what to expect when the National Bureau of Statistics publishes the data at 10 a.m. on Tuesday:<\/p>\n
Consumption<\/p>\n
A decline in retail sales in May would mark their first monthly decline since the country reopened after Covid in late 2022. The drop is in large part a form of payback for a government program that encouraged households to trade in old consumer goods, prompting them to bring forward their purchases.<\/p>\n
Car sales plunged more than 22% in May from a year earlier in the sixth straight month of double-digit declines. The government has scaled back subsidies for electric vehicle purchases this year, while the Iran oil shock hurt sales of gasoline-powered cars.<\/p>\n
Even though total tourism expenditure during the early May Labor Day holiday grew from a year ago, average per capita spending was little changed and remained well below 2019 levels.<\/p>\n
A gauge of consumer confidence slipped in April to the weakest since mid-2025. Households continued to repay both short-term and longer-term loans in May, driving bank lending to the sector to contract for the second straight month.<\/p>\n
\u201cUnderlying consumption momentum remains weak,\u201d Australia & New Zealand Banking Group economists including Raymond Yeung said. \u201cThe continued deleveraging cycle in the household sector is likely to increase reliance on fiscal policy as the main tool for stabilization.\u201d<\/p>\n
Investment<\/p>\n
Fixed-asset investment is forecast to drop 2.3% for the first five months compared with the same period a year before. That would extend its surprise slump in April following a recovery during the first quarter.<\/p>\n
For May alone, FAI\u2019s fall is estimated at 7% on year following a 8.2% slump the previous month, Goldman Sachs Group Inc. economists led by Andrew Tilton wrote in a Friday note. They blamed heavy rainfall and a heat wave in different parts of the country and the slow pace of government bond issuance for the weakness.<\/p>\n
The government lowered public spending in March and April as bond sales decelerated. Authorities likely felt comfortable with the economy\u2019s first-quarter performance, while economists also pointed to a potential lack of eligible projects.<\/p>\n
Looking forward, investment could improve as policymakers have more recently moved to accelerate the implementation of a 7 trillion-yuan ($1 trillion) \u201cSix Networks\u201d program, which prioritizes building infrastructure essential for AI expansion and people\u2019s livelihoods.<\/p>\n
\u201cThe urgency is clear following April\u2019s sharp investment slowdown,\u201d Citigroup Inc. economists led by Xiangrong Yu wrote in a note last week. \u201cWhile early green shoots are emerging, the path forward will likely be a K-shaped recovery led by new economy investment.\u201d<\/p>\n
Industrial Sector<\/p>\n
The 4.3% gain in industrial output expected for May would represent a slight improvement over its performance in the prior month, when it grew at the weakest in almost three years.<\/p>\n
Powering the improvement is the spurt of export growth this year, with outbound shipments soaring in May at their fastest pace in three months.<\/p>\n
A global investment supercycle in artificial intelligence drove up prices and demand for hardware made by the world\u2019s manufacturing powerhouse. Chips and computers contributed to about half the growth in both exports and imports, with overseas sales of semiconductors soaring 111%.<\/p>\n
But evidence still indicates that momentum remains fragile, especially after China\u2019s industry expanded at a pace closer to 5% and above following the pandemic.<\/p>\n
Satellite data analyzed by Pantheon Macroeconomics suggested the intensity of light \u2014 a measure used to approximate on-the-ground economic activity \u2014 was weaker for the whole of China in May than during the same period last year, even as it improved slightly from April.<\/p>\n
\u201cDomestic demand remains weak,\u201d Huachuang Securities Co. economists including Zhang Yu wrote in a note earlier this month.<\/p>\n
\u201cWhat stands out is the industrial output reading under high oil prices \u2014 if it continues to stay soft, it could signal a risk that second\u2011quarter economic growth falls below the target range,\u201d they said, referring to Beijing\u2019s annual expansion goal.<\/p>\n
–With assistance from Yujing Liu.<\/p>\n
(Updates with comment from Bloomberg Economics)<\/p>\n
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\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — China\u2019s consumer spending may have contracted for the first time since the pandemic, a setback that…\n","protected":false},"author":2,"featured_media":536190,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[174],"tags":[4932,79,11902,8886,5818,179,18,42299,19,17],"class_list":["post-536189","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bloomberg","tag-business","tag-consumer-spending","tag-consumption","tag-economists","tag-economy","tag-eire","tag-greater-china","tag-ie","tag-ireland"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116753946640168272","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/536189","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=536189"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/536189\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/536190"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=536189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=536189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=536189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}