China's economy loses steam in April as retail sales hit 40-month low

China’s economy slowed significantly in April, with retail sales falling 0.2% year-on-year—the weakest growth since December 2022—according to official data. The slowdown comes amid declining domestic demand and a property sector downturn, despite a surge in exports and a slight decrease in urban unemployment.

The National Bureau of Statistics reported that retail sales in China grew only 0.2% in April from a year earlier, far below economists’ forecast of a 2% increase. This marks the weakest retail growth since December 2022, as consumer spending remains subdued despite the easing of COVID restrictions.

Industrial output rose 4.1% in April, down from 5.7% in March, and below the expected 5.9% increase. Meanwhile, urban fixed asset investment declined by 1.6% in the first four months of 2026, with property investment plunging 13.7%, deepening the sector’s ongoing downturn. New home prices continued to decline in April, albeit at a slower pace.

Exports, however, surged 14.1% in April, driven by increased overseas demand as foreign buyers stockpiled goods amid geopolitical tensions related to the Iran conflict. The unemployment rate edged down slightly to 5.2% in urban areas. Chinese officials highlighted ongoing challenges, including energy market volatility and supply chain disruptions linked to the Middle East conflict.

Why It Matters

This slowdown signals potential challenges for China’s economic recovery, which had appeared robust earlier in the year. Weak domestic demand, especially in real estate, combined with external pressures, could impact growth prospects and policy decisions. The divergence between export strength and domestic weakness underscores structural issues that policymakers need to address.

Background

China’s economy grew 5% in the first quarter, supported by strong exports and manufacturing. However, retail sales and fixed asset investment have shown signs of weakening since then, with the property sector experiencing a significant decline. The government has prioritized boosting domestic consumption but has yet to see substantial results, and recent data suggests a potential slowdown ahead.

“Further declines in home prices would deepen the hit to household balance sheets, and the property downturn has already caused significant job losses across construction and related sectors.”

— Lizzi Lee, Center for China Analysis

“China’s strong export performance helped mitigate domestic demand weaknesses but was not enough to prevent overall economic deceleration.”

— Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management

“Volatility in energy markets and supply chain disruptions from the Middle East conflict continue to cloud the global economic recovery, while China is actively promoting renewable energy efforts.”

— Fu Linghui, Spokesman for China’s National Bureau of Statistics

What Remains Unclear

It remains unclear whether recent stimulus measures will be sufficient to reverse the slowdown, and how ongoing geopolitical tensions will influence future economic data. The trajectory of the property market and consumer confidence also remain uncertain, with further declines in home prices still possible.

What’s Next

China is expected to monitor economic indicators closely over the coming months, with policymakers likely to adopt a wait-and-see approach until the second quarter GDP data is available in July. Additional stimulus measures may be considered if conditions deteriorate further.

Key Questions

What caused the slowdown in China’s retail sales?

Retail sales slowed due to subdued consumer spending amid declining property values, ongoing sector downturns, and external geopolitical tensions affecting supply chains.

Will China implement new stimulus measures?

Policymakers are expected to remain cautious, assessing economic data before deciding on further stimulus, with some analysts predicting modest policy adjustments if the slowdown persists.

How does export growth impact China’s economy?

Strong export growth has helped offset domestic demand weaknesses temporarily, but reliance on external markets makes the economy vulnerable to global geopolitical and economic shifts.

What is the outlook for China’s property sector?

The property market remains depressed, with continued declines in home prices and investment, which could further impact household wealth and employment in related sectors.