Bloomberg: After tariff reductions, Chinese consumption unexpectedly improved.

Gate News bot message, in May, as China’s economy shakes off the impact of tariff roller coasters, domestic consumption unexpectedly saw a rise, providing confidence to China in addressing the threat of a long-term trade war with the United States.

According to official data released on Monday, retail sales rose 6.4% last month, marking the fastest growth since December 2023, and exceeding all expectations. This offset the impact of a slowdown in industrial output expansion. Industrial output grew 5.8%, below the median estimate from a Bloomberg survey of analysts.

The latest economic data has allowed the market to gain a comprehensive understanding of how China is responding to the turmoil caused by the trade war initiated by U.S. President Trump. In mid-May, the tariff truce agreement reached between China and the United States temporarily alleviated the tariffs that Chinese export products could have faced, which could have been as high as 145% in the U.S.

Unexpectedly strong consumption may provide some comfort to policymakers. The Chinese economy is suffering from a prolonged real estate crisis, deflationary pressures, and concerns about unemployment, all of which have dampened household confidence.

Large online shopping platforms like JD.com launched their annual “618” shopping festival earlier this year, which may help retail sales rise. The discount activities on these platforms started around mid-May this year, while in 2024, they will begin at the end of May.

China previously set an ambitious economic growth target of around 5% for 2025 and has made stimulating domestic consumption a top priority this year.

However, the relative strength of the economy so far this year may buy the government more time, allowing it to avoid deploying more support measures to boost economic rise. China’s budget deficit for four months has reached a historic high—this follows the central bank’s cut of the policy interest rate and reserve requirement ratio in May, after which stimulus measures were introduced.

Source: Bloomberg