Bank of China International: July retail sales maintained low growth, while service consumption steadily increased.

According to a research report released by BOC International, the National Bureau of Statistics and other departments have announced some macroeconomic data for July 2026. The total retail sales of consumer goods in July increased by 0.6% year-on-year, with a slight decline in growth compared to the previous month. In July, the catering retail sales increased by 1.4% year-on-year, and the retail sales of goods increased by 0.5% year-on-year. From January to July, service retail sales grew by 5.0% year-on-year, continuing to outpace the growth of goods retail sales, indicating a steady release of service consumption demand. The bank maintains an "outperform" rating for the industry compared to the broader market. The consumption data from January to July 2026 shows an overall low-speed growth trend, with service consumption performing well. Severe weather in some regions during the summer in July has affected offline consumption, and high base effects continue to have an impact. There is an expectation for more policies to stimulate consumption and expand domestic demand to boost consumer confidence. Key points from BOC International are as follows: Low growth in retail consumption in July, with a month-on-month decline The total retail sales in July amounted to 3.9 trillion yuan, an increase of 0.6% year-on-year, with month-on-month growth declining, lower than the growth rate of 1.0% in June and the consensus expectation of 1.3% from Wind. From January to July, total retail sales reached 28.8 trillion yuan, increasing by 1.2% year-on-year. The slowdown in retail sales growth in July was mainly affected by last year's high base due to various consumer promotions and national subsidies, as well as extreme weather events recently impacting offline sales in certain regions. Excluding the substantial automobile sales related to subsidies, the year-on-year growth of retail sales in July would be 2.5%, and from January to July, it would be 2.7%. By category, catering revenue rose by 1.4% year-on-year, while retail sales of goods increased by 0.5% year-on-year. Additionally, online sales performed well, with online retail sales of goods increasing by 4.6% year-on-year and online service retail sales rising by 5.2% year-on-year from January to July. Continuous release of demand for cultural and tourism consumption in the summer Service consumption has continued to outperform goods retail sales, with service retail sales growing by 5.0% year-on-year from January to July, exceeding goods retail sales by 3.9 percentage points. Moreover, entering July, the summer cultural and tourism consumption market has remained buoyant, with retail sales of tourism consultation and leasing services, as well as cultural and recreational services, increasing by 11% and 10% year-on-year respectively from January to July. The importance of service consumption continues to grow. This summer, due to fluctuations in travel costs related to climate and flights, consumption may exhibit a "low at the beginning, high later" characteristic, and there are expectations for the continued buoyancy of the cultural and tourism service consumption market. Consumer confidence still needs to be boosted From January to July, the national service production index grew by 4.7% year-on-year. The PMI for the service industry in July was 49.3%, a decrease of 1.1 percentage points compared to June. In July, the urban surveyed unemployment rate was 5.2%, an increase of 0.2 percentage points from June and 0.1 percentage points higher than the consensus expectation from Wind. Furthermore, the most recent consumer confidence index for June stood at 89.40, a month-on-month decline, but still reflecting certain year-on-year growth. In July, the State Council issued the approval for the "15th Five-Year Plan to Expand Consumption," which mentioned that by 2030, the overall scale of the consumer market will continue to expand, the resident consumption rate will significantly increase, and the overall consumption of goods and services across society will grow rapidly, with the total retail sales of consumer goods reaching approximately 60 trillion yuan, further enhancing the role of consumption in economic growth. The plan also covers contents regarding the gradual increase in the proportion of service consumption, enhancement in residents' consumption capacity, expectations, and confidence, which may help stabilize consumer confidence in the long term. Main risks facing the rating Insufficient recovery of consumer confidence, industry supply and demand recovery falling short of expectations, and policy implementation not meeting expectations.