China’s retail sales expand 12.4% in May as recovery gains momentum

China’s retail sales expanded 12.4 percent year-on-year in May as consumption-driven post-pandemic economic growth gained momentum despite slower growth compared with the previous month, an official with the National Bureau of Statistics (NBS) said on Wednesday.

In May, retail sales reached 3.59 trillion yuan ($515.9 billion), up 0.81 percent from the previous month, data from the NBS showed.

“Although consumption growth slowed in May, compared with the 17.7-percent increase in April, it still continued a gradual pick-up, accelerated by consumption in the services industry during the five-day May Day holidays,” said Fu Linghui, a spokesperson for the NBS.

Driven by consumption during the May Day holidays, the services activity indexes for the long-distance travel, retail, catering, culture, sports and entertainment industries in May, which are closely related to personal consumption, were higher than that in April and fell into the “high boom” range, according to the NBS.

Online consumption remained robust, with sales surging 24.7 percent year-on-year to 4.82 trillion yuan during the January-May period, contributing 22.6 percent of total retail sales.

“There is a good foundation to support the recovery of consumption with the expanding employment rate and domestic vaccination rate, and the moderate increase in prices,” Fu said.

“The slowdown of consumption growth is partly due to the resurgence of new coronavirus cases in the country. If outbreaks continue to spread, it may affect consumer confidence,” Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Wednesday.

Consumption for all of the second quarter is expected to show the same growth pattern as seen in May, according to Dong.

In addition to consumption growth, industrial output and investment also continued to gain momentum in May.

China’s industrial output rose 8.8 percent year-on-year and 0.52 percent month-on-month in May, according to official data. From January to May, the added value of industries above designated size increased 17.8 percent, with a two-year average growth rate of 7.0 percent, mostly driven by the high-tech industry.

According to the NBS, output of the high-tech manufacturing sector rose 17.5 percent year-on-year in May, with the output of new-energy vehicles, industrial robots and integrated circuits increasing 166.3 percent, 50.1 percent and 37.6 percent, respectively.

Notably, factory gate prices rose at the fastest rate in more than 12 years in May, with 9-percent growth for the producer price index (PPI) on a yearly basis – up 2.2 percentage points from April. The gain was mostly due to higher global bulk commodity prices and stimulus policies in the US and Europe.

Despite the surge in the PPI, its potential impact on consumer goods is limited, officials and experts said.

“There is sufficient supply to meet demand,” Fu said. “China is not pursuing monetary and fiscal stimulus policies like the US and Europe, and the government is increasing its efforts to ensure supply and price stability.”

US economic data for May showed that inflation is surging, but it’s unlikely to have a huge impact on China, Dong noted.

“China is able to absorb part of the impact caused by US inflation as the country is accelerating investment in high-tech and eco-friendly industries, a trend that is expected to offset the strong demand for international bulk commodities,” Dong said.