China’s retail sales growth slowed to 2.90% YoY in November 2025, slightly below expectations but still signaling moderate consumer demand. This marks a marginal decline from October’s 3.00% and continues a downward trend from mid-year peaks above 6%. The latest data from the Sigmanomics database highlights ongoing challenges in domestic consumption amid shifting macroeconomic and geopolitical conditions.

Drivers this month

• Consumer spending softened amid cautious household sentiment.
• Durable goods purchases slowed, while services consumption remained stable.
• Urban retail sales outpaced rural areas, reflecting uneven recovery.

Policy pulse

The 2.90% growth rate remains below the People’s Bank of China’s implicit target range of 4-5% for retail sales growth to sustain robust economic momentum. Monetary policy remains accommodative but cautious, balancing inflation control with growth support.

Market lens

Immediate reaction: USD/CNH edged up 0.15% post-release, reflecting mild disappointment. Chinese equities showed modest declines, while bond yields held steady, signaling a wait-and-see stance among investors.

The retail sales figure is a core indicator of domestic demand, closely linked to GDP growth and consumer confidence. The 2.90% YoY increase in November compares with a 12-month average of approximately 4.30%, evidencing a slowdown from the 6.40% peak in June 2025. This deceleration aligns with other foundational indicators such as industrial production growth (3.20% YoY) and fixed asset investment (4.50% YoY), both showing moderate expansion.

Monetary Policy & Financial Conditions

The People’s Bank of China has maintained a steady benchmark lending rate at 3.65%, with liquidity injections aimed at stabilizing credit growth. Financial conditions remain moderately loose, but rising global interest rates and tighter external financing conditions pose headwinds.

Fiscal Policy & Government Budget

Fiscal stimulus continues through infrastructure spending and targeted subsidies, but the government’s budget deficit remains constrained at 3.20% of GDP. This limits the scope for aggressive demand-side support, emphasizing the need for private consumption to pick up.

Drivers this month

• Weaker auto and electronics sales contributed -0.40 percentage points to growth.
• Food and beverage retail sales remained resilient, adding 0.30 percentage points.
• Online retail sales growth slowed to 5.20% YoY, down from 6.80% in October.

Policy pulse

The data underscores the challenge for the PBOC to balance inflation control with growth support. Inflation remains moderate at 2.30%, allowing room for targeted easing if consumption weakens further.

Market lens

Immediate reaction: SHCOMP index declined 0.50% within the first hour, reflecting investor concerns over slowing domestic demand. The CNY weakened slightly against the USD, consistent with risk-off sentiment.

Looking ahead, retail sales growth in China faces a complex interplay of factors. The base case scenario forecasts a gradual recovery to 3.50%-4.00% YoY by mid-2026, supported by ongoing urbanization and digital consumption trends. However, downside risks include renewed COVID-19 outbreaks, geopolitical tensions, and tighter global financial conditions, which could push growth below 2.50% (bearish scenario, 30% probability). Conversely, a successful policy stimulus package and improved consumer confidence could lift growth above 4.50% (bullish scenario, 25% probability).

External Shocks & Geopolitical Risks

Trade tensions and supply chain disruptions remain key risks. Any escalation could dampen consumer sentiment and import-dependent retail sectors.

Structural & Long-Run Trends

Long-term drivers such as rising middle-class incomes, e-commerce expansion, and rural market penetration support a positive outlook for retail sales growth beyond cyclical fluctuations.

In summary, China’s retail sales YoY growth of 2.90% in November 2025 reflects a cautious consumer environment amid shifting macroeconomic conditions. While the slowdown from mid-year highs is notable, structural factors and policy support provide a foundation for moderate recovery. Investors and policymakers should monitor evolving financial conditions, geopolitical developments, and domestic demand signals closely to gauge the trajectory of China’s consumption-led growth.

Insight: Retail Sales vs. 000001.SS Since 2020

Since 2020, retail sales growth and the Shanghai Composite Index (000001.SS) have shown a positive correlation, with peaks in retail sales often preceding equity rallies. For example, the mid-2025 retail sales peak at 6.40% coincided with a 12% rise in the index over three months. The recent slowdown to 2.90% has corresponded with a 4% pullback in equities, underscoring the sensitivity of market sentiment to consumer demand data.