14 Jun

China’s Retail Sales Beat Expectations—Here’s Why

WRITTEN BY Mohit Oberoi, CFA

China’s retail sales

On June 14, China released several economic data points. While the country’s industrial production and fixed asset investment data were below expectations, its May retail sales were better than expected. The data showed China’s May retail sales rising 8.6%, 50 basis points higher than expectations. The metric stood at 7.4% in April.

As China transitions from an investment-driven economy to a consumption-driven economy, its retail sales data will assume greater significance. If we consider that shift, we’ll find that the sharp jump in the country’s May retail sales paints a somewhat rosy picture of its economy. According to CNBC, some analysts believe the spike “was likely due to higher inflation rather than any turnaround in weak consumer confidence.” It’s worth noting that China’s retail inflation rose to a multimonth high last month amid higher food inflation.

Online retail sales

Online retail sales increased 17.8% year-over-year in China in May. Leading Chinese e-commerce company Alibaba (BABA) has lost 12.1% so far in the second quarter but is up almost 17% for the year. Last year, Alibaba cofounder Jack Ma predicted that the US-China trade dispute would last decades.

US retail sales data

US retail sales data is expected to be released later today. On June 13, hundreds of US companies, including Walmart (WMT) and Target (TGT), signed a letter addressed to President Donald Trump. The letter, sent by industry association Tariffs Hurt the Heartland, said, “We know firsthand that the additional tariffs will have a significant, negative and long-term impact on American businesses, farmers, families and the U.S. economy.”

Meanwhile, amid the escalation in the US-China trade war, the upcoming G20 summit—where President Trump and Chinese President Xi Jinping are scheduled to meet—is attracting outside attention. Read Why Investors Should Keep an Eye on the Upcoming G20 Meeting for more analysis.

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