China retail sales growth slows to 1.3% as consumer demand weakens

China's retail sales growth slowed to 1.3% in the first half of 2026 from 1.4% in the January-May period, the National Bureau of Statistics reported, as persistent consumer weakness weighed on the world's second-largest economy.

"The deceleration from 1.4% to 1.3% over a single month of data accumulation points to a consumer sector that is still searching for a floor," economists at a Beijing-based research firm said in a note. "The property downturn and weak labor market conditions continue to suppress household spending appetite."

The January-June reading marks a continued deceleration from the 1.4% pace recorded for the first five months of the year, which itself was down from 1.5% in the January-April period. The data adds to a growing body of evidence that China's domestic demand recovery remains uneven, even as the broader economy expanded at a 3-1/2-year low in the second quarter, according to separate NBS data.

China's economy grew at its weakest pace since the pandemic-era lockdowns in the April-June period, missing market forecasts, as the prolonged property sector slump and subdued consumer confidence offset gains from an export boom driven by artificial intelligence-related demand. The NBS reported second-quarter gross domestic product growth that fell short of consensus expectations, marking the first time China has missed its annual growth target since the Covid-19 pandemic.

The retail sales data underscores the divergence between China's external and internal demand. While exports have benefited from a global AI-driven investment cycle, domestic consumption has struggled to regain momentum. Consumer spending accounts for more than half of China's economic output, making the retail sales trajectory a critical variable for policymakers.

The People's Bank of China has maintained a cautious approach to monetary easing, keeping its benchmark loan prime rates unchanged in recent months as it balances support for growth against the need to defend the yuan. The weighted-average reserve requirement ratio stands at 7.0% after a 50-basis-point cut in January, leaving room for further easing if economic conditions deteriorate.

The slowdown in retail sales increases pressure on Chinese policymakers to deliver additional stimulus measures. Market participants are watching for potential fiscal expansion, including increased central government bond issuance and further consumption subsidies for big-ticket items such as automobiles and home appliances. The National Development and Reform Commission has signaled that policy support for consumption will remain a priority in the second half of the year.

For global investors, the weakening consumer data carries implications beyond China's borders. A sustained slowdown in Chinese consumer demand could weigh on commodity prices, particularly industrial metals such as iron ore and copper, and dampen earnings for global luxury goods companies that rely on Chinese shoppers. The offshore yuan weakened against the dollar following the data release, reflecting market concerns about the growth outlook.

This article is for informational purposes only and does not constitute investment advice.