Growth in China’s 618 shopping festival slowed sharply as the deterioration in consumer spending continued

BEIJING – The decline in consumer spending in China continued in June, with growth during the country’s biggest online shopping festivals slowing sharply from a year ago.

Total online sales during the annual “618” shopping event from May 13 to June 18 grew 4% over last year, a sharp drop from the 15.2% growth recorded during the festival last year, retail company Syntun said Monday night.

The figures add to signs that domestic spending remains a weak spot in the Chinese economy despite strong performance in exports and technology-related sectors.

Retail sales fell 0.6% in May from a year earlier, marking the first decline since China lifted pandemic restrictions in 2022.

“The gap between high tech/AI and commodity/consumption continues to widen in both industrial production and capital market data,” Goldman Sachs’ Hui Shan said in a note on Monday.

“Home visits by senior leaders, communications with the latest policy, and our on-site channel monitoring all suggest these trends will continue.”

The firm lowered its second-quarter real GDP growth forecast to 4.5% from a year ago, down from a previous estimate of 4.7%, while keeping the full-year outlook unchanged at 4.7%.

The 618 shopping festival provided one of the latest snapshots of consumer demand, with spending growth remaining subdued despite major retailers’ promotional efforts.

Syntun’s estimate of 934 billion yuan ($137.86 billion) includes “quick” same-day delivery orders and group purchases.

Among e-commerce platforms, Alibaba’s Tmall led in sales, followed by JD.com and ByteDance’s Douyin, but the segment saw sales growth of only 0.9%, Syntun reported.

Second-hand electronics platform ATRenew said sales of pre-owned products grew nearly 80 percent from a year ago during the 618-month shopping period, highlighting demand for low-cost goods.

China’s online retail sector got a boost last year from government services that encouraged consumers to trade in old electronics for newer models.

This year, the ways of spending money have changed. Instead of the 400% subsidy-driven growth in household goods sales seen during the past 618 shopping festivals, the demand for household cleaning supplies has grown this year, said Jacob Cooke, founder and CEO of WPIC, citing statistics disclosed by JD.com.

“Fashion is doing well, lifestyle, beauty, and health supplements are also doing really, really well. So people are taking good care of themselves, looking good, and they want to go out and experience the world,” Cooke said on CNBC’s “The China Connection” on Friday.

He also noted the increased demand for artificial intelligence hardware and the growing use of AI tools by online shopping platforms, which have increased the profit margins of brands.

However, the broader economic impact of AI remains uncertain.

“AI-related job losses could increase economic volatility and delay, if not reverse, the recovery of the real estate market and household consumption,” said Shan’s Goldman.