China’s retail spending growth saw decline in first half of 2025

China’s retail spending growth has seen a drop from 7% to 3.2% in the first half of 2025, according to the latest S&P Global report. Titled China Retail: 2024 Review and 2025 Outlook, the report projects tepid consumption trends will persist into the second half of 2024 and through 2025, as weak macroeconomic conditions, a subdued property market, and muted economic prospects continue to dampen consumer confidence.

Key pressures include the fading impact of government subsidies and a decline in dining-out expenditure, partly due to tighter restrictions on public sector spending.

The survey revealed that China's retail sales expanded by 7.7% in 2023, but growth is expected to moderate to 4.3% in 2024, reflecting a slight downward revision of 0.1 percentage points from earlier forecasts. The deceleration is set to continue in 2025, with sales growth anticipated to ease further to 3.8%.

The catering sector, which saw robust 20.4% growth in 2023, is expected to slow significantly to 5.6% in 2024 and 5.0% in 2025, stabilising after years of volatility. Notably, food delivery sales are outpacing dine-in receipts as major platforms intensify competition for market share.

Meanwhile, food and beverage sales are forecast to rise to 6.8% in 2024 before easing to 5.0% in 2025, with baby formula sales declining due to persistently low birth rates. In contrast, demand for low-sugar drinks and health supplements remains a bright spot, sustaining growth in the segment.

Household appliances are projected to rebound to 4.6% growth in 2024 before easing to 0.4% in 2025, as government trade-in schemes and consumption vouchers provide only marginal support. Apparel sales growth is expected to decrease to 0.9% in 2024 before a modest recovery to 2.0% in 2025, driven largely by the resilience of athleisure wear. Automobile sales growth is also slowing, forecast at 2.6% in 2024 and increasing slightly to 3.0% in 2025. The "other" retail category remains steady, with growth holding at 5.1% in both 2024 and 2025.

Offline retail sales are expected to grow by 3.0% in 2024 before dipping to 2.9% in 2025, while online sales, though slowing from 7.0% in 2024 to 5.7% in 2025, continue to outpace physical retail. Online penetration is set to rise from 32.7% in 2024 to 33.3% in 2025, with most major categories seeing increased digital adoption. Online penetration is expected to grow across most major categories. Investment into offline retail is geared toward creating consumer experiences, and as part of the strategy to create omnichannel platforms.

With mixed performance across sectors and channels, the overall retail landscape is expected to remain subdued through 2025. The report highlights key risks to China’s retail outlook, including a potential further slowdown in catering demand, particularly if consumers reduce spending on services, and a broader pullback in discretionary expenditure.

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