China's economic slowdown deepens as retail sales hit 3-year low
What's the story
China's economic recovery appears to be losing steam, with November's retail sales growth hitting a three-year low. The National Bureau of Statistics reported a mere 1.3% increase in retail sales from last year, falling far short of Bloomberg's estimate of 2.9%. This is the slowest growth since the COVID-19 pandemic and highlights a broader trend of weakening consumer spending and investment in China.
Economic indicators
Industrial production and investment activity also decline
Industrial production in China fell short of expectations. It grew by 4.8% in November, missing Reuters's estimate of a 5% increase. Meanwhile, fixed-asset investment witnessed a decline of 2.6% over the first 11 months of this year due to a continued slump in property investment. The urban unemployment rate in China remained unchanged at 5.1%, indicating little improvement in labor market conditions. Annual car sales also witnessed a steep decline of 8.5% in November, the biggest drop in 10 months.
External dependence
China's economy increasingly reliant on foreign demand
China's struggle to revive domestic consumption has made its economy more vulnerable to external risks. In recent months, growth has largely depended on foreign demand amid the ongoing tariff war initiated by US President Donald Trump. Weak consumer and business demand has weighed on the world's second-largest economy for years, leading to deflation that has affected profits and wages.
Policy response
China's leadership prioritizes expansion of domestic demand
Recent trends indicate potential challenges ahead, with slowing loan growth and a sharp, unexplained decline in investment. These concerns were reflected in high-level economic meetings last week, where China's leadership prioritized the expansion of domestic demand for the coming year amid foreign trade uncertainty. While officials reiterated their commitment to maintaining growth-supportive policies, they did not signal any immediate or aggressive intervention measures.