Overview
Goldman Sachs' latest analysis indicates that China's nominal retail sales growth has continued to decelerate, falling from 5.0% year‑over‑year in the first half of 2025 to 2.5% in the second half of 2025 and further to 1.3% in the first half of 2026. Adjusting for higher consumer‑price inflation, the bank notes that real sales momentum is likely even weaker.
Drivers of Weakness
The government‑subsidised consumer‑goods trade‑in programme, which had supported sales since late 2024, now drags growth. Goldman Sachs estimates that tighter implementation, reduced subsidy intensity and a front‑loaded surge in durable‑goods demand together trimmed first‑half retail sales by roughly 90 basis points. The scheduled reduction in purchase‑tax relief for new‑energy vehicles contributed an additional 30 basis‑point drag. Vehicle fuel prices rose approximately 20% after the Iran‑War escalation. Household fuel purchases fell by about 20% between March and June, but the effect on nominal retail sales of petroleum products was minimal, and lower energy prices are not expected to lift overall retail sales in the near term. Weather anomalies—hotter May and July and above‑normal rainfall in March, April and July—did not materially deviate from historical averages. Regression analysis suggests weather explained some category‑level variations but had limited influence on headline retail sales.
Outlook
Goldman Sachs projects that retail‑sales growth will stay low in the second half of 2026. More favourable base effects are expected to add roughly 70 basis points to year‑over‑year nominal growth in the third quarter, after which base effects turn negative in the fourth quarter. The bank forecasts an average nominal retail‑sales growth of 1.7% year‑over‑year for the second half, leaving full‑year 2026 growth at 1.5%.