Fuel Price Hikes and Downpours Weigh on May Day Travel and Spending
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Fuel Price Hikes and Downpours Weigh on May Day Travel and Spending
Affected by rising fuel surcharges due to the Iran war and heavy rains in southern China, domestic travel growth slowed to 3.5% year-on-year during the 2026 May Day holiday, air travel contracted compared to last year, and consumer performance lagged behind the Spring Festival.
- Average daily travel numbers grew only 3.5% year-on-year during the May Day holiday—the lowest Golden Week growth rate since 2024.
- Domestic air travel contracted by 5.7% year-on-year due to soaring fuel surcharges, marking the weakest performance since late 2022 after pandemic policy adjustments.
- Heavy rains in the south caused a north-south split in tourism activities; Guangdong’s tourism revenue rose just 0.9%, far below the 13.9% increase seen during the Spring Festival.
- Key commercial district foot traffic and sales grew 5.0% and 5.3% respectively, weaker than their Spring Festival performances.
- Property market loosening policies in cities like Shenzhen and Guangzhou boosted viewing and transaction activity during the holiday, but markets in lower-tier cities continued to shrink.
Report interpretation
Overview
Nomura Securities released a report analyzing the economic and consumer performance during China's 2026 May Day Labor Holiday. The report noted significant suppression of personnel movement and consumer spending due to dual impacts from increased fuel costs resulting from the Iran conflict and widespread heavy rains across much of China. While some major cities experienced localized recovery following pre-holiday real estate easing measures, the broader services sector new orders index dropped to its lowest point since late 2022, indicating increasing resistance to service spending, with ongoing pressure on household consumption.
Core views
Significant slowdown in travel data. Domestic and cross-border passenger volume growth for the May Day period (May 1-5) was merely 3.5% year-on-year, significantly lower than the respective increases of 6.6% and 10.1% during the Lunar New Year holidays. Affected by skyrocketing fuel surcharges, domestic air travel saw a contraction of 5.7% year-on-year, representing the weakest Golden Week performance since late 2022 post-pandemic policy shift. Growth in car travel also dramatically decelerated from 6.5% in the previous Lunar New Year holidays to 2.6%. Although railway travel remained stable without price fluctuations, it failed to effectively absorb overflow demand from aviation, growing only 4.6% year-on-year. Consumption performance underperformed expectations. According to Ministry of Commerce data, footfall and sales at key pedestrian streets grew 5.0% and 5.3% year-on-year over the first four days of the holiday, below the 6.7% and 7.5% increases observed during the Lunar New Year. Box office revenues grew only 1.4% year-on-year, with an increase in attendance of 10.2% offset by an 8.0% decrease in average ticket prices. The Ministry of Culture and Tourism has not yet released official tourism data, but high-frequency indicators suggest that overall tourism activity was weaker than during the Spring Festival. Regional tourism showed clear North-South divergence. Affected by extensive rains in the South, outdoor activities were restricted, leading to noticeably slower performance in Southern regions. Taking Guangdong, the largest southern province, as an example, tourist arrivals and revenue grew by 2.1% and 0.9% year-on-year, sharply declining from 8.1% and 13.9% increases during the Lunar New Year. In contrast, better weather conditions in Northern areas led to more robust results, with Shandong seeing tourist arrivals and revenue grow by 5.3% and 4.0% year-on-year, Beijing recording increases of 5.1% and 6.6% respectively. A localized rebound in the property market despite an overall downturn. Pre-holiday loosening measures in Shenzhen, Guangzhou, Tianjin, and other locations followed Shanghai's lead, stimulating local interest in home purchases and boosting inquiries. During the holiday, new and secondary residential transactions in Shenzhen surged 58.0% and 80.6% year-on-year, reaching multi-year highs. However, the report suggests these stabilizing signs are mainly confined to major cities, while most lower-tier cities continue to experience severe declines due to ongoing population outflows, with housing markets still contracting drastically. April data shows that top 100 developers’ contract sales area declined 15.4% year-on-year, and high-frequency indicators indicate house prices continued to drop in May.
Analysis framework
The report employs a combination of high-frequency data tracking and comparative analysis. First, it compares May Day holiday data against Lunar New Year long holiday (LNY) metrics for travel and consumption growth rates to identify short-term trends in consumer momentum. Next, it dissects different transport modes (air, rail, auto), quantifying how fuel cost hikes impact specific travel methods through substitution effects and suppressive forces. Then, regional contrasts between typical northern and southern provinces help isolate weather factors' interference with tourism consumption. Finally, integrating real estate policy implementation timing with high-frequency transaction data assesses immediate stimulus effects versus underlying long-term trends.
Methodology notes
Quantity-Price Segregation Analysis
When analyzing box office and travel data, the report splits total income or passenger count into 'quantity' (e.g., attending audiences, number of travelers) and 'price' (e.g., average ticket price, fuel surcharges) dimensions to determine whether low totals result from insufficient demand or pricing issues.
External Shock Transmission Analysis
The report examines how geopolitical events (Iran war) transmit via commodity prices (fuel) to influence micro-consumption behavior (contraction in air travel), demonstrating the direct path of external supply shocks impacting internal service consumption.
Key data
- Average Daily Travel Numbers Growth Rate During May Day Holiday3.5%Year-on-year growth rate, the lowest Golden Week figure since 2024
- Domestic Air Travel Growth Rate-5.7%Contraction year-on-year, affected by fuel surcharge spikes
- Sales Growth Rate at Key Pedestrian Streets5.3%Year-on-year growth rate, lower than the 7.5% increase during the Lunar New Year
- Guangdong Tour Revenue Growth Rate0.9%Year-on-year growth rate, significantly below the 13.9% increase during the Lunar New Year
- New Home Sales Growth Rate in Shenzhen58.0%Year-on-year growth rate, stimulated by property market loosening policies
- Top 100 Developers' April Sales Area Growth Rate-15.4%Year-on-year decline, slightly narrowed from March's 18.1% drop
Impact & implications
The report views the dampening effect of fuel cost increases and extreme weather on holiday consumption as temporary, yet they reflect fragile current household consumption willingness. A sluggish services PMI new orders index signals greater headwinds for service spending, compounded by fading effects from durable goods trade-in policies, amplifying overall pressures on consumption growth. Regarding real estate, while loosened policies in primary cities have generated pulse-like rebounds, deteriorating fundamentals in lower-tier cities remain unaddressed, meaning full nationwide recovery will take time.
Risks
- Continued high fuel prices further suppressing travel demand
- Frequent extreme weather disrupting offline consumption scenarios
- Ongoing contraction in lower-tier city real estate sales dragging down investment
- Stagnant employment and income expectations in services constraining consumption rebound
What to watch
- Subsequent months' changes in services PMI new orders index
- Inventory clearance status of second and third-tier city real estate sales
- International oil price movements and adjustments to domestic fuel surcharges
- Government announcements regarding additional measures to stimulate consumption