China: economy grows, but retail consumption remains weak

The economy of China showed a stronger-than-expected rebound in the first quarter of 2026, with GDP expanding 5% year-on-year, driven by industry and exports. However, domestic consumption—and particularly retail sales—continues to be the main weak spot.

According to official data cited by Bloomberg, retail sales grew just 1.7% in March, slowing from the 2.8% recorded in the first two months of the year and falling short of market expectations.

The weakness in consumption was especially evident in durable goods: car sales dropped 12% year-on-year, furniture fell 9%, and home appliances declined 5%, in a context where government incentives—such as trade-in subsidies—have lost momentum.

Other indicators also point to fragile domestic demand: household spending rose only 2.6% in real terms—the slowest pace since 2022—while the urban unemployment rate climbed to 5.4%, the highest level in a year.

In contrast, industrial output increased 5.7% in March and exports surged 15% in the quarter, highlighting an increasingly unbalanced economy between strong supply and weak domestic demand.

This scenario reduces the urgency for broad-based stimulus, although targeted measures are expected to support consumption in the coming months.