China: Retail sales growth deteriorates in May
June 16, 2021
Retail sales expanded 12.4% year-on-year in May (April: +17.7% yoy). May's result marked the worst reading since December 2020 and was slightly below market expectations. However, May’s reading was notably above the corresponding figure for May 2019—this comparison isolates Covid-19-related base effects—suggesting that underlying consumer spending was still robust.
On a monthly basis, retail sales rose 0.8% in seasonally-adjusted terms in May, which was better than April’s 0.2% uptick. Meanwhile, annual average retail sales growth rose to 12.2% in May (April: +11.0%), signaling an improving trend in the retail trade sector.
Retail sales will likely weaken in June, amid the flare-up of Covid-19 cases domestically—particularly in Guangdong province—which has led to some localized restrictions and likely increased caution among consumers. However, assuming the outbreak is contained, underlying consumer spending momentum (stripping out base effects) should gain steam later in the year as the labor market improves and the vaccine rollout accelerates.