China's 618 shopping festival growth slows sharply as consumer spending malaise persists

• Total online sales during the May 13-June 18 shopping event reached 934 billion yuan ($137.86 billion), with e-commerce platforms showing only 0.9% sales growth
• Goldman Sachs cut Q2 real GDP growth forecast to 4.5% from 4.7%, citing widening divergence between high-tech/AI sectors and property/consumption segments
• Demand shifted toward lower-cost goods, with secondhand electronics sales up nearly 80% and growth in services like home cleaning, while AI-driven job displacement could further dampen consumer spending and housing demand

Summary: China's 618 Shopping Festival Reflects Persistent Consumer Weakness

China's 618 shopping festival showed sharply decelerating growth, with total online sales from May 13 to June 18 rising just 4% year-over-year to 934 billion yuan ($137.86 billion), according to Syntun. This marks a significant slowdown from last year's festival, underscoring persistent weakness in consumer spending.

Key Developments:

• Retail sales declined in May for the first time since China ended pandemic restrictions in 2022
• E-commerce platforms showed minimal growth: Alibaba's Tmall, JD.com, and ByteDance's Douyin collectively grew only 0.9% in sales
• Goldman Sachs downgraded Q2 GDP growth forecast to 4.5% from 4.7%, while maintaining full-year outlook at 4.7%

Sector Divergence:

The data reveals a widening gap between high-tech/AI sectors and consumer-facing industries. While exports and technology remain strong, household consumption lags significantly. AI-related hardware and services showed robust demand, though Goldman Sachs warned that AI-driven job displacement could further suppress spending and delay property market recovery.

Spending Patterns:

Consumer behavior shifted toward value and services. Secondhand electronics platform ATRenew reported nearly 80% growth in pre-owned product sales. Unlike last year's 400% subsidy-driven home appliance surge, this year saw increased demand for home cleaning services, fashion, lifestyle products, beauty, and health supplements.

Market Implications:

The persistent consumption weakness poses challenges for China's economic rebalancing efforts. Despite promotional efforts, household spending remains subdued, contrasting with continued strength in exports and technology sectors, suggesting uneven economic recovery and ongoing structural challenges.