The latest data from the National Bureau of Statistics of the People’s Republic of China shows that the total retail sales of consumer goods in May decreased by 0.6% compared to the previous year, falling below expectations. This marks the first decline in three years and indicates a persistent weakness in consumer confidence. In the first five months of this year, fixed asset investment across the country decreased by 4.1% compared to the previous year, marking the largest drop in six years. Investment in real estate development plummeted even further by 16.2%, dragging down overall investment performance.
On June 16th, official data on the national economic performance for May was released. The Purchasing Managers’ Index (PMI) for the manufacturing sector in May was reported at 50.0%, barely above the threshold of 50, signaling a slight decline of 0.3 percentage points compared to April.
Domestic demand in mainland China remains weak, with the total retail sales of consumer goods in May showing a year-on-year decrease of 0.6%. This is the first negative growth since the end of the “dynamic zero-COVID policy” nearly three years ago in December 2022.
According to a report by Reuters, this figure falls below the previously expected 0.0%. Despite the five-day “May Day holiday” in May, consumer confidence was not significantly boosted, as the impact of the government’s appliance replacement program gradually diminishes.
Furthermore, the real estate market continues to stagnate. According to the latest official data, in May, out of 70 large and medium-sized cities, only 16 cities saw an increase in the prices of newly built residential properties from the previous month, while the majority of cities remained in a downward trend. The prices of newly built homes in third-tier cities decreased by 0.4% monthly, further widening the decline from the previous month. The weakness in the property market is also reflected in investment and sales data, with a significant drop of 16.2% in real estate development investment.
The secondary housing market shows a similar divergence. Prices of second-hand homes in first-tier cities increased by 0.4% monthly, while prices in second-tier cities decreased by 0.2% and in third-tier cities by 0.4%. Looking at the annual growth rates, second-hand home prices in first-tier cities are still down by 5.8% year-on-year, while second and third-tier cities decreased by 5.7% and 6.2% respectively. The overall real estate market continues to face adjustment pressures.
The weakness in the property market is also evident in investment and sales data. According to statistics, fixed asset investment (excluding rural households) in the country decreased by 4.1% in the first five months of this year; even after deducting real estate development investment, fixed asset investment still decreased by 1.2% compared to the previous year. Infrastructure investment increased by 0.6% annually, manufacturing investment decreased by 0.4%, and real estate development investment saw a significant drop of 16.2%, negatively impacting overall investment performance.
Sales in the property market have not shown signs of improvement. The sales area of newly built commercial housing in the country decreased by 10.8% annually in the first five months of this year, and the sales volume of newly built commercial housing decreased by 13.5%, indicating persistently weak market demand.
Looking at investments by sector, investment in the primary sector increased by 5.9% annually, while the secondary sector saw a marginal increase of 0.1%, and investment in the tertiary sector decreased by 6.8%. Private investment decreased by 7.1%, and even after excluding the impact of real estate development, it still dropped by 3.5%, reflecting that business investment confidence has not fully recovered.
In terms of employment, the national urban survey unemployment rate in May was 5.1%, a decrease of 0.1 percentage points compared to April. The average urban survey unemployment rate for the first five months of this year was 5.2%.