China’s retail sales growth sharply misses estimates in November, deepening consumption worries

China’s economic slowdown deepened in November, with growth in consumption, investment and industrial production falling short of expectations, as authorities sought to curb supply while scrambling to stimulate demand and halt a real estate downturn.

Retail sales increased 1.3% last month compared to the previous year; It vastly beat Reuters’ average forecast for growth of 2.8%, slowing from a 2.9% increase in the previous month.

Industrial production rose 4.8% in November from a year ago, falling short of expectations for a 5% increase and marking its weakest growth since August 2024.

Investments in fixed assets, including real estate, contracted by 2.6% in the January-November period compared to the previous year; That’s sharper than the 2.3% decline economists had predicted.

That decline deepened from 1.7% in the January-October period and was the sharpest drop since the pandemic outbreak in 2020, according to data from Wind Information dating back to 1992.

“The contraction in fixed asset investment and the decline in real estate prices have been reflected in consumer sentiment in recent months,” Pinpoint asset management president and chief economist Zhiwei Zhang said in a note tracking the data, adding that more supportive fiscal and monetary stimulus measures are expected in the first quarter of next year. he said.

Real estate investment fell 15.9% in the first 11 months of this year. 10.3% decrease in the January-October period While the collapse in the real estate market continues.

In another sign that the sector’s downturn is still searching for a bottom, declines in house prices in 70 major cities accelerated further in November. new house prices Down 1.2% in tier 1 cities Including Beijing, Guangzhou and Shenzhen, second-hand home prices fell 5.8% compared to the previous year.

Meanwhile, economists at Golman Sachs said in a preview last week that falling car sales were a major drag on overall retail sales, with a “negative distortion” effect from the earlier-than-usual start of the Singles’ Day online shopping festival pulling demand forward from November to October.

Data from the China Automobile Dealers Association showed that auto retail sales by volume fell for the first time in three years in November. decreased by 8.1% compared to the previous year It rose to 2.23 million vehicles as many local governments paused trade-in subsidies.

Many online shopping sites have extended their promotional periods from the first half of October to November 11 in a bid to shake up consumer spending, making it the longest Singles’ Day sales period ever. However, sales performance was still disappointing as consumers tightened their purse ties. gross product volume increased by only 12%That compares with growth of 20% last year, according to Syntun’s data.

Chinese policymakers have promised more policy support for next year to boost domestic demand and boost consumption and investment. The Ministry of Finance made a statement expression On Saturday, it announced plans to issue ultra-long-term special government bonds next year to finance projects that strengthen national security.

Proceeds will also be directed to equipment improvements and consumer goods exchange programs. The ministry has also pledged to increase its investment budget in a bid to cushion the decline in fixed asset investment in recent months.

But analysts appear less optimistic, with Beijing yet to table any meaningful stimulus measures.

“While we see the implementation of targeted policy support, it is difficult to achieve a meaningful increase in consumption without a clearer improvement in job prospects and wage growth,” said Zavier Wong, market analyst at asset management company eToro.

Eswar Prasad, a professor of economics at Cornell University and senior fellow at the Brookings Institution, expressed concerns about the sustainability of China’s economic growth. In an opinion piece In the report published on Sunday, the economist called for structural reforms to rebalance the economy, including measures to support the labor market, strengthen the social safety net and support private enterprise.

“The government clearly wants to rebalance growth and understands what is needed to support household consumption and increase productivity. But there is little sense of urgency to achieve these goals and no clear timeline for concrete policy measures,” Prasad said. he said.

In November, the urban unemployment rate remained at 5.1%, unchanged from the previous month. Youth unemployment has become more worrying Latest readings of October are at 17.3%.

Still, China’s economy appears on track to meet its official growth target of “around 5 percent” thanks to an increase in exports to non-U.S. markets, even as tariff tensions with Washington put pressure on shipments to the world’s largest consumer market.

China’s trade surplus rose to a record $1.1 trillion in November, breaking the full-year record of $992.2 billion in 2024 in just 11 months.

International Monetary Fund Managing Director Kristalina Georgieva last week called on China to “step up” support for domestic consumption and move away from dependence on exports for growth.

“China has tried to use the renminbi exchange rate as a tool to support exports,” Prasad said, noting the significant depreciation in the value of the yuan on a broad trade-weighted basis..

The offshore yuan rose to 7.0475 per dollar on Monday, its strongest level since October last year, LSEG data showed.