China’s economy presented a mixed picture in May, with industrial output slowing to a six-month low while retail sales saw their fastest growth since December 2023, offering a brief reprieve for policymakers navigating a fragile trade truce with the U.S. and ongoing property sector woes.
Factory output rose 5.8% year-on-year in May, down from 6.1% in April and below analyst expectations, reflecting persistent weakness in manufacturing and the lingering impact of U.S. tariffs. Fixed-asset investment also lost momentum, rising 3.7% in the first five months of 2025, below the projected 3.9%. Notably, property investment slumped 10.7% year-on-year.
In contrast, retail sales surged 6.4%, boosted by government-subsidized trade-in programs, strong holiday spending, and early promotions tied to the annual “618” e-commerce festival. Officials attributed the boost in consumption partly to an increase in foreign tourism, following relaxed visa rules.
Despite the consumer uptick, analysts remain cautious. The property market continues to drag, with home prices falling across all city tiers. Deflation also deepened in May, with consumer prices down 0.1% and producer prices declining 3.3% year-on-year.
Trade data provided mixed results. While overall exports grew 4.8%, shipments to the U.S. plunged over 34%, the sharpest drop since early 2020. A temporary 90-day tariff truce between Washington and Beijing brought limited relief, with total U.S. tariffs still standing at 55%.
The urban jobless rate edged down to 5.0%, the lowest since last November. However, economists warn that without further stimulus, the rebound in consumption may prove short-lived. Several local governments have already paused subsidy programs due to depleted funding.
Beijing is expected to consider additional fiscal support later in the year if growth dips below 4.5%, but for now, officials appear to be relying on targeted measures to stabilize the economy without large-scale intervention.