Nomura: China Retail Sales Momentum Weakened Further in May
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Nomura highlights a further deceleration in Chinese retail sales momentum this May, with year-over-year growth slowing to 3.1%, down from 4.2% in April and missing market expectations of 3.8%. The pullback was primarily driven by weakness in automotive and property-related categories, partially offset by resilient performance in catering and online consumption.
Auto retail sales contracted by 2.5% year-over-year, widening from the previous 1.8% decline. Property-related segments also struggled, with furniture and home appliance sales falling 4.0% and 3.2%, respectively. In contrast, catering revenue maintained solid growth at 8.5%, and online retail sales surged 12.0%, increasing their share of total retail volume to 28.5%. Essential consumer goods remained stable, while discretionary items like cosmetics softened.
Nomura attributes the broader weakness to insufficient consumer confidence and persistently high savings rates. Furthermore, the marginal effectiveness of policy stimulus is waning, as the scale of consumer voucher distributions dropped 20% sequentially. Rural areas continued to outperform urban centers in retail growth.
Looking forward, Nomura projects retail growth to remain range-bound between 3% and 4% for the second half of the year, yielding an annual rate around 4.5%. Risks remain skewed to the downside, with potential labor market deterioration threatening to push growth below the 3% threshold without additional policy support.