Economy
China retail sales slump 1st time in years, investment also down
China’s economy displayed increasing unevenness in May, with retail sales declining for the first time in over three years and investment weakening even as industrial production picked up pace.
Tuesday’s official data highlighted a two-speed growth pattern in the world’s second-largest economy, with factories buoyed by surprisingly resilient exports but domestic demand weakening amid a multiyear property market downturn.
Retail sales, a key gauge of consumption, slid 0.6% in May, data from the National Bureau of Statistics (NBS) showed, reversing April’s 0.2% rise and below the estimated 0.0% in a Reuters poll. It was the first monthly fall since December 2022.
The fragility was evident in the auto sector. A downturn in domestic car sales extended into an eighth consecutive month in May, underscoring softening demand in the world’s largest auto market, where pressure is likely to persist through the rest of the year.
Travelers’ spending during the five-day Labour Day holiday in May was lukewarm, and the impact of the government’s consumer-goods trade-in scheme is fading. A high base from May last year also contributed to the decline.
At a bar in Shanghai’s financial district, manager Jie’ao Feng said his business has taken a hit from shrinking corporate entertainment budgets. He has been offering group deals to draw larger crowds, but this has squeezed margins.
Screening World Cup matches hasn’t helped much, he said, because of the late-night and early-morning scheduling of the matches, and he has had fewer customers in June than in May, when his sales saw a boost from the long holiday.
“Consumers are not as impulsive as before,” Feng said.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said that the weak retail sales data places pressure on the government to consider policy measures to stabilize consumption.
“I still expect policy ‘fine tuning’ will come in July after the second quarter GDP data is released.”
‘Divides characterized economy in May’
By contrast, industrial output rose 4.5% in May from a year earlier, picking up from 4.1% growth in April and beating expectations of a 4.3% increase.
A surge in global AI investment and related tech demand has helped the world’s biggest manufacturer offset the export hit many had expected from the Iran war. China’s high-tech manufacturing output rose 15.1% in May.
“Several divides characterized the economy in May: the divide between domestic and external demand, the divide between AI and the traditional industries, and the divide between goods retail and services consumption,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Services consumption grew 5.4% in January-May, much better than goods sales, and is becoming a growing driver of household consumption, but it also slowed from 5.6% in the first four months.
Xu expected economic growth in the second quarter to slow to 4.5% from 5% in the first.
“For full-year 2026, achieving the growth target of 4.5-5% won’t be difficult, but soft domestic demand still warrants policy intervention in the second half.”
Investment slump deepens, property drag persists
Investment data was also much weaker than expected. Fixed-asset investment fell 4.1% in the first five months of 2026, following a 1.6% decline in January-April. Economists had expected a 2% fall.
NBS spokesperson Fu Linghui said the decline was due in part to high temperatures and heavy rain in some regions as well as the transition from old to new growth drivers.
China still has ample room for investment in the future, with new urbanization, rural revitalisation, the development of “new quality productive forces” and improvements in public services all requiring support, Fu added.
Property investment extended its decline in the first five months, dropping 16.2% compared with the same period last year after falling 13.7% in January-to-April. Property sales and new construction also fell more sharply.
On a month-over-month basis, new home prices fell at a slightly faster pace in May, even as larger cities showed tentative signs of stabilization.
Weak household loan data released last week suggested that people remain wary of borrowing to buy homes amid sluggish income growth and job insecurity.
The labor market is still under pressure, with about 12.7 million graduates leaving schools during the summer, while fears of AI displacement are causing worker anxiety. But the nationwide survey-based jobless rate eased to 5.1% from April’s 5.2%.
Economists say strong exports could continue to provide a prop to China’s economic growth this year, but its widening trade surplus may cause some disputes.
“The export boom can help to mitigate the weak domestic demand in the short term. But given the size of China’s economy, strong export growth will likely lead to tension with trading partners,” Zhang from Pinpoint Asset Management said, adding a potential trade conflict with Europe is a risk to watch in the coming months.
Elon Musk’s SpaceX, fresh off its record-breaking IPO, told U.S. securities regulators on Tuesday that it would acquire Anysphere, the firm behind artificial intelligence coding startup Cursor, at a valuation of $60 billion.
In a filing with the Securities and Exchange Commission (SEC), SpaceX said the all-stock deal was expected to close in the third quarter of this year and that Cursor would become a wholly owned subsidiary.
The two companies had announced a partnership in April that included a clause for Cursor to be potentially bought by SpaceX at the $60 billion figure.
Cursor, founded in 2022 and based in San Francisco, specializes in AI for creating software code, particularly for business uses.
Combining Cursor’s software and product expertise with SpaceX’s “Colossus” AI training supercomputer will enable the company “to build the world’s most useful models,” the companies said in April when announcing their partnership.
The acquisition comes after SpaceX on Friday finally went public, raising a record-breaking $86 billion in its IPO.
A two-day surge in the company’s share price saw SpaceX close trading on Monday at a valuation above $2.5 trillion, placing it among the six largest companies in the world, ahead of Broadcom, Saudi Aramco and Tesla and just behind Amazon.
Co-founded in 2002 by Musk, the world’s first trillionaire, SpaceX has since expanded into a major satellite operator and folded in his artificial intelligence company, xAI, which includes the social media platform X, formerly Twitter.
The Bank of Japan (BOJ) lifted its key policy rate to a 31-year high on Tuesday as it counters a spike in consumer prices caused by the Middle East war, even as Washington and Tehran agreed on a peace memorandum.
The central bank for the world’s fourth-largest economy raised its benchmark rate 25 basis points to 1.0%, the highest since 1995 and marking the first increase since December.
The widely expected decision followed rate hikes by the European Central Bank (ECB) and in Indonesia last week, after the conflict caused economic havoc and led to rising prices worldwide.
With U.S. inflation at a three-year high, expectations are growing that the Federal Reserve (Fed) will follow suit, albeit not at new boss Kevin Warsh’s first gathering this week.
“While higher crude oil prices have been exerting downward pressure on economic activity, the economy has generally been supported by factors such as high levels of corporate profits and an improvement in the employment and income situation,” the BOJ said.
The consumer price index (CPI) has been below 2%, thanks in part to government energy subsidies.
“However, the price pass-through stemming from the rise in crude oil prices has been progressing at a relatively fast pace in business-to-business transactions, which could spread to an increase in consumer prices across a wide range of items,” the central bank added.
“Against this backdrop, taking into account that medium- to long-term inflation expectations have also continued to rise, there is a risk of underlying CPI inflation deviating upward to a level above the price stability target of two percent.”
Looking ahead, the bank said that it will “continue to raise the policy interest rate and adjust the degree of monetary accommodation.”
“In this regard, it will consider the timing and pace of adjustment, while closely monitoring the impact of the future course of the situation in the Middle East on Japan’s economic activity and prices,” it said.
It also indicated that it would pause the tapering of its colossal program of bond purchases after next April.
U.S.-Iran deal
The U.S. and Iran agreed to end their three-month war on all fronts and reopen the Strait of Hormuz, through which about a fifth of the world’s oil and gas passed prior to the conflict.
The accord was set to be physically signed in Switzerland on Friday, but hundreds of ships remain stuck, and it will likely take considerable time for trade flows to normalize.
Japan relied on the Middle East for around 90% of its crude supplies before the war began on Feb. 28.
Its problems have been exacerbated by a falling yen, caused by the rise in oil prices and the gap between U.S. and Japanese interest rates, which are among the lowest in the developed world.
The government spent around 11.7 trillion yen ($72 billion) last month propping up the currency, which has been languishing at around 160 yen against the dollar.
The yen briefly jumped against the dollar after the announcement on Tuesday, while the Nikkei 225 stock index rose above 70,000 points for the first time.
BOJ deputy governor Shinichi Uchida was slated to address the media on Tuesday afternoon after the rate decision, filling in for governor Kazuo Ueda, who is in hospital.
The central bank is under pressure from markets to keep tightening interest rates, and also from Prime Minister Sanae Takaichi’s government not to snuff out growth with high borrowing costs.
The BOJ began hiking rates from below zero in 2024 after nearly two decades of ultra-loose monetary policies.
Akino Fukuda at Moody’s Analytics said Tuesday’s move was “another step toward policy normalization.”
“Real rates remain negative, financial conditions are still relatively loose, and inflation pressures are turning higher, so more hikes are necessary,” Fukuda said.
“The question now is the pace.”
Türkiye’s five-year credit default swap (CDS), a key gauge of the country’s sovereign risk, fell to 225 basis points on Monday, marking its lowest level since Feb. 26, as easing Middle East tensions lifted investor sentiment and boosted appetite for risk assets.
The decline coincided with a broad rally across global markets following the agreement between Washington and Tehran, which is expected to end months of conflict and pave the way for the reopening of the Strait of Hormuz, one of the world’s most important energy transit routes.
On Sunday, U.S. President Donald Trump announced that an agreement with Iran had been finalized and said he was authorizing the reopening of the Strait of Hormuz and the removal of a U.S. naval blockade.
“The Deal with the Islamic Republic of Iran is now complete. Congratulations to all!” Trump said in a post on his Truth Social platform.
The easing of Middle East tensions supported emerging-market assets, while lower oil prices improved sentiment toward energy-importing economies such as Türkiye.
CDS contracts are widely used by investors to insure against the risk of default on sovereign or corporate debt. A lower CDS level generally indicates reduced perceived credit risk and can support more favorable external borrowing conditions.
Türkiye’s risk premium had come under pressure earlier this year amid heightened regional tensions and concerns over potential energy supply disruptions.
The latest decline signals an improvement in market sentiment, supported by expectations that reduced energy-related risks could ease inflationary pressures and encourage capital flows into emerging markets.
Oil prices fell sharply following the U.S.-Iran agreement, as investors priced in the potential normalization of shipping through the Strait of Hormuz.
The decline in crude prices is particularly significant for Türkiye, which relies heavily on energy imports and is sensitive to movements in global oil and natural gas costs.
The improvement in Türkiye’s CDS also reflected broader optimism across international markets, as investors returned to risk assets following the de-escalation of tensions in the Middle East.
Türkiye’s central government budget posted a deficit of TL 298.2 billion ($6.44 billion) in May, official data showed on Monday.
Budget revenues fell 18% year-over-year to almost TL 1.1 trillion, while expenditures rose 27% to nearly TL 1.4 trillion, according to the Treasury and Finance Ministry.
The primary balance, which excludes interest payments, posted a deficit of TL 169.3 billion in May, compared with a surplus of TL 346.4 billion in the same month last year.
Interest expenditures increased 16% from a year earlier to TL 128.9 billion, while non-interest expenditures rose 28.3% to TL 1.25 trillion.
Tax revenues declined 22.1% in May from a year earlier to TL 931.5 billion.
In the January-May period, the budget deficit stood at nearly TL 1.1 trillion.
Budget revenues rose 33.9% year-over-year to TL 6.28 trillion in the first five months of the year, while expenditures increased 37.4% to TL 7.34 trillion.
Tax revenues rose 32.4% year-over-year to TL 5.3 trillion during the period.
Interest expenditures jumped 51.1% to almost TL 1.3 trillion, while non-interest expenditures increased 34.8% to TL 6.1 trillion.
Libya’s National Oil Corporation (NOC) has signed production-sharing deals with several international energy firms after the country’s first licensing round in nearly 20 years, Chair Massoud Suleman said Monday.
The agreements were signed with Spain’s Repsol and Türkiye’s state-owned Turkish Petroleum Corporation (TPAO), Italy’s Eni and QatarEnergy, and a consortium comprising Hungary’s MOL Group, TPAO and Repsol, Suleman said in a statement posted on social media.
The deals follow Libya’s 2025 bid round, under which the NOC awarded exploration acreage to foreign companies as the Organization of the Petroleum Exporting Countries (OPEC) member seeks to attract investment and raise oil production capacity to 2 million barrels per day from around 1.4 million bpd currently.
Suleman said the agreements reflected growing confidence in Libya’s oil and gas sector and would support exploration, development and production growth.
One of Africa’s biggest oil producers, Libya awarded exploration blocks in February to companies including Chevron, Eni, QatarEnergy, TPAO, and Repsol in its first licensing round since 2007.
Foreign investors have been wary of putting money into Libya, which plunged into chaos since a NATO-backed uprising toppled and killed longtime dictator Moammar Gadhafi in 2011.
It remains divided between the U.N.-recognized government in the west and its eastern rival, backed by military commander Khalifa Haftar.
Disputes between them over oil revenues have often led to oilfield shutdowns and output disruptions.
Fox Corp. has reached an agreement to acquire the streaming pioneer Roku in a cash-and-stock deal valued at approximately $22 billion, including debt, the companies said on Monday.
Roku will continue to be run as an open, partner-friendly platform, the companies said, and there appears to be no immediate changes that customers will see.
Fox and Roku said that the combined company will become the third-largest player in U.S. television by share of viewing.
Media reports had surfaced on Friday that Roku was looking at its strategic options, including a possible sale.
Speculation was rampant as to which companies might be interested in an acquisition. Aside from Fox, names being tossed about as potential buyers included Netflix, Amazon, Comcast and Disney.
The deal will give Fox access to more than 100 million global households, along with the Roku channel and its first-party data. Fox oversees a massive sports, news and entertainment network, as well as Tubi, which it acquired in 2020.
Roku founder Anthony Wood had initially worked within Netflix in the early 2000s as it attempted to make the seismic shift from renting DVDs to streaming.
Roku was spun off by Netflix, however, and the company released its first set-top box in 2008.
Wood, who is Roku’s chairperson and CEO, said his motivation in pursuing the technology was his desire to record and play his favorite show, “Star Trek.”
Fox Corp. CEO Lachlan Murdoch said in a statement that combining the businesses will bring together Fox’s live news and sports content with a streaming platform with a large viewership. It will also give Fox more exposure to advertising and streaming subscriptions.
“The combination with FOX is an extraordinary opportunity to accelerate our vision, scale faster and innovate more aggressively for viewers, partners and advertisers,” Wood said in prepared remarks.
Wood will have an ongoing role at the company and will join the Fox board of directors after the transaction closes.
Murdoch said during a conference call that the combined company will be better positioned for the next decade of video than either company would’ve been alone.
“We are confident this is the right transaction, at the right moment, for all the right reasons,” he said.
Fox will pay $96 in cash and 0.9693 shares of its Class A common stock for each Roku Class A and Class B share outstanding. The transaction is valued at $160 per Roku share.
Existing Fox shareholders are expected to own approximately 73% of the combined company and Roku shareholders will own about 27%, once the deal closes.
The deal is expected to close in the first half of next year. It still needs approval from Fox and Roku shareholders and also regulatory approval.
Fox’s stock declined before the market open while shares of Roku rose slightly.
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