Bankinter | Negative macroeconomic data in May: retail sales improve but influenced by government subsidies. House prices in free fall and weak industrial production. Retail sales stood at 6.4% (year-on-year) against 4.9% expected and 5.1% previously. Used house prices fell by 0.5% (month-on-month) from -0.4% in May, and industrial production slowed to +5.8% (year-on-year) versus +6.0% expected and +6.1% previously.
Analysis team’s view: Negative reading of the data with limited impact on the market. Starting with retail sales, the figures are surprisingly better, although they are distorted by government subsidies for the replacement of household appliances and electronic devices, which encourage consumers to buy products today that they would have bought in the future. In other words, the recent improvement in the indicator will be followed by a deterioration in consumption in the coming months. Industrial production figures are also not encouraging. They slowed in May, reflecting lower trade activity between China and the US due to the imposition of tariffs. Meanwhile, house prices continue to fall. In month-on-month terms, they fell by 0.5% and have remained in negative territory since May 2023. In short, the Chinese economy continues to show signs of weakness, which will be accentuated by a less favourable trade outlook. Furthermore, we believe that fiscal stimulus measures are insufficient and do not represent a real commitment to reviving the economy. We therefore continue to view China as an unattractive investment idea.
