China May retail sales dip 0.6% as industrial output up 4.5%

China's economy displayed a deepening divergence between its export strength and domestic weakness in May, with official data showing the first monthly decline in retail sales since the end of 2022. The figures, released by the National Bureau of Statistics on Tuesday, underscore the persistent challenges facing policymakers as they contend with a prolonged property downturn and fragile consumer confidence.

Retail sales, a key gauge of consumer spending, fell 0.6 percent year-on-year in May, reversing a 0.2 percent increase in April. This marks the first contraction since December 2022, when the economy was grappling with the immediate aftermath of Covid-19 restrictions. The decline occurred despite a boost from the five-day Labour Day holiday, indicating underlying caution among households. The auto sector exemplified this trend, with domestic car sales extending a downturn into an eighth consecutive month.

In contrast, industrial production showed resilience, growing 4.5 percent year-on-year in May, accelerating from 4.1 percent growth in April. This strength was supported by a surge in exports, which jumped 19.4 percent last month. Analysts note that a global investment cycle...