Online retail continued to recover in July, while auto-related drag weakened overall retail

Overview

The report tracks China's retail and online-sales data for July 2026. Overall retail growth slowed again, but this was mainly caused by a decline in auto sales; excluding autos, consumption and online physical-goods sales remained relatively stable. JPMorgan therefore concludes that the consumption recovery is continuing, but remains narrow and is driven primarily by online channels.

Core views

Overall retail sales grew only 0.6% YoY in July, but increased 2.5% excluding autos. Online physical-goods sales rose 3.3% YoY, marking the third consecutive month above 2.5%; online services sales returned to positive growth, driving a rebound in total online retail growth. For e-commerce platforms, the data provide marginal support for third-quarter GMV, but are insufficient to change the sector's investment thesis. The report places greater emphasis on easing YoY drag from home appliances and strong communications-equipment sales at JD, believing downside risks to its electronics-revenue expectations are declining.

Analysis framework

Uses monthly YoY data from the National Bureau of Statistics, supplemented by JPMorgan estimates of monthly growth in online services and categories; assesses consumption momentum and its implications for platform GMV and electronics revenue by excluding autos, comparing high bases from trade-in subsidies, and tracking category sales changes.

Methodology notes

• Macro consumption trackingYear-over-year growth comparison

  Compares YoY growth in retail and online sales in July with June and the same period last year.

  Used to identify changes in aggregate consumption, resilience in online channels, and marginal shifts in category momentum.

• Structural breakdownRetail analysis excluding autos

  Excludes autos from total retail sales to assess the underlying performance of non-auto consumption.

  The report believes that July's overall retail weakness was mainly due to falling auto sales, while consumption excluding autos was more stable.

• Base effectsHigh-base analysis for trade-ins

  Compares YoY base changes for the home-appliance category following the peak in subsidies.

  The narrowing decline in home appliances mainly reflects the gradual easing of last year's high base, rather than a clear demand inflection point.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Alibaba Group Holding Limited (BABA/9988.HK)

  Continued growth in online physical-goods sales provides marginal support for third-quarter GMV.

  Strengths

  Online consumption is relatively more resilient than overall retail sales.

  Weaknesses

  The consumption recovery is narrow, with no demand inflection point supporting a broad platform valuation re-rating.

  Comparison

  Like PDD and VIPS, benefits from improving online retail, but the report does not identify differentiated direct catalysts.

  Risks

  Continued weakness in overall retail, insufficient policy support, and slower growth in online consumption.

• JD.com, Inc. (JD/9618.HK)

  The significantly narrowed decline in home appliances and strong communications-equipment sales help reduce downside risk to electronics revenue.

  Strengths

  YoY pressure related to electronics is likely to continue easing as the high base from trade-in programs fades.

  Weaknesses

  The improvement in home appliances is mainly driven by base effects, rather than a clear demand inflection point.

  Comparison

  Compared with the limited support for a valuation re-rating of integrated platforms, the report considers downside-risk mitigation in JD's electronics-revenue trajectory more actionable.

  Risks

  Failure of demand to recover, weakening communications-equipment momentum, and policy support falling short of expectations.

• PDD HOLDINGS INC (PDD)

  Growth in online physical-goods sales provides marginal support for third-quarter GMV.

  Strengths

  Benefits from the resilience of online channels relative to overall offline retail.

  Weaknesses

  The report does not consider the macro data sufficient to change the company's core investment thesis.

  Comparison

  Like BABA and VIPS, receives a marginally positive signal at the GMV level.

  Risks

  Weak consumption recovery and continued deceleration in online goods sales growth.

• Vipshop (VIPS)

  Growth in online physical-goods sales provides marginal support for third-quarter GMV.

  Strengths

  The recovery in online retail and improvement in apparel sales versus June provide some support.

  Weaknesses

  Apparel growth remains below May levels, and consumption momentum is not broad-based.

  Comparison

  Like BABA and PDD, benefits from resilient online sales but does not receive a stronger sector re-rating signal.

  Risks

  Further cooling in apparel consumption and weak overall discretionary spending.

Key data

• July YoY growth in total retail sales0.6%1.0% in June.
• July YoY growth in auto sales-17.0%The primary drag on overall retail sales.
• July YoY growth in retail sales excluding autos2.5%3.0% in June.
• July YoY growth in online physical-goods sales3.3%3.9% in June and above 2.5% for the third consecutive month.
• July YoY growth in total online retail sales2.4%2.0% in June, driven by the return to positive growth in online services sales.
• Penetration rate of online physical-goods sales in the first seven months of 202625.7%Up 0.8 percentage points YoY.
• July YoY growth in home-appliance sales-1.9%A marked improvement from -8.7% in June and -15.6% in May.
• July YoY growth in communications-equipment sales20.4%16.5% in June.
• YoY growth in online food sales in the first seven months of 202616.9%The report estimates July monthly growth at approximately 17% to 18%.
• YoY growth in online apparel sales in the first seven months of 20265.8%The report estimates July growth at around 3%, improving from June but below May.
• YoY growth in online daily-necessities sales in the first seven months of 20261.1%The report estimates July was roughly flat to slightly negative.

Impact & implications

Resilience in online physical-goods sales provides marginal support for third-quarter GMV at BABA, PDD, and VIPS, but macro consumption has not yet shown a broad-based demand inflection point and therefore cannot directly support a valuation re-rating for integrated e-commerce platforms. For JD, the gradual easing of the high-base impact from home-appliance trade-in programs and continued growth in communications equipment suggest that the YoY drag on electronics revenue may continue to narrow in the second half of 2026.

Risks

• A continued sharp decline in auto sales could further pressure overall retail sales and consumer confidence.
• Without additional policy support, consumer demand may struggle to form a clear inflection point.
• Continued deceleration in online physical-goods sales growth could weaken support for platform GMV.
• Improvement in home-appliance YoY growth is primarily driven by base effects, while actual demand recovery may be weaker than expected.
• Persistently weak daily-necessities sales indicate that momentum remains lacking in some consumption segments.

What to watch

• Subsequent monthly YoY growth in retail sales excluding autos and online physical-goods sales.
• Auto and home-appliance trade-in policies, as well as changes in subsidy bases.
• Whether home-appliance sales turn positive after base effects ease.
• The sustainability of high growth in communications-equipment sales.
• Divergence across online categories such as food, apparel, and daily necessities.
• Third-quarter GMV at BABA, JD, PDD, and VIPS, as well as JD's electronics-revenue performance.