China’s economic slowdown deepened in August with a raft of key indicators missing expectations, as weak domestic demand persisted and Beijing’s campaign against industrial overcapacity curbed output.
Retail sales last month rose 3.4% from a year earlier, data from the National Bureau of Statistics showed Monday, missing analysts’ estimates for 3.9% growth in a Reuters poll and slowing from July’s 3.7% growth.
Industrial output growth slowed to 5.2% in August, compared to the 5.7% jump in July, marking its weakest level since August 2024, according to LSEG data. Economists had expected the data to be unchanged from the previous month.
Fixed-asset investment, reported on a year-to-date basis, expanded just 0.5%, a sharp slowdown from the 1.6% expansion in the January to July period, and undershooting economists’ forecasts for 1.4% growth.
Within that segment, the contraction in real estate investment worsened, slumping 12.9% in the first eight months, government data showed. Investment in the manufacturing and utilities sector — including electricity, fuel and water supplies — increased 5.1% and 18.8% from a year earlier, respectively.
Fixed-asset investments have been largely propped up by state-owned enterprises, with investments from the private sector contracting from a year earlier, said Yuhan Zhang, principal economist at think-tank The Conference Board’s China Center.
Investments in manufacturing overall have seen “modest and uneven growth,” Zhang added, mainly supported by policy-driven state investment in infrastructure, high-tech and industrial upgrading, while real estate activity remains weak.
China’s survey-based urban unemployment rate in August came in at 5.3%, edging higher from 5.2% in the prior month. The statistics bureau attributed the rise in the jobless rate to the graduation season.
“We should be aware that there are many unstable and uncertain factors in (the) external environment, and national economic development is still confronted with multiple risks and challenges,” the statistics bureau said in an English-language release.
“We must fully implement macro policies, focus on keeping employment, businesses, market…expectations stable, deepen reform and opening up and innovation, so as to foster steady and healthy economic development.”
Retail sales, excluding automobile consumption, grew 3.7% in August from a year earlier. Consumption growth in rural areas outpaced that in the urban centers, growing 4.6% in August from a year ago.
The NBS spokesperson Fu Linghui said in a press conference following the release that it was hard to tell whether consumer inflation had reached an inflection point, while expecting consumer prices to remain volatile.
China’s consumer price index fell more than expected last month, dipping 0.4% from a year earlier, while a deflation in producer prices persisted for a third year.
Fu acknowledged uncertainty around “imported inflation” — where prices of imported goods may increase for reasons such as a weakening yuan, rising global commodity prices, and higher tariff rates. He also pointed to support from “anti-involution” policies targeting excessive competition and price wars from manufacturers that would eventually spill over to consumer prices.
Among the categories that experienced the largest growth, sales of gold, silver and jewelry grew 16.8% in August from a year earlier, while that of sports and entertainment products rose 16.9%, and sales of furniture increased 18.6% from a year ago.
The biggest laggards in consumption were petroleum, as well as tobacco and alcohol related products.
Service consumption gained momentum, led by travel, leisure and transport, signaling a gradual shift in spending toward services, Zhang pointed out.
The slowdown in retail sales growth was mainly due to weaker demand for home appliances and electronics, as the boost from Beijing’s consumer goods trade-in subsidies started to fade, Lisheng Wang, China economist at Goldman Sachs, said in a note Monday.
Wang expected consumption growth to slow “more meaningfully” from September due to the “unfavourable base effects,” stressing that “incremental and targeted easing” is necessary in the coming quarters.
The mainland’s CSI 300 index advanced nearly 1% after the release of China’s economic data.
“The slowdown is not a surprise to the markets,” as investors had already expected growth to weaken in the third quarter, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, after the boost from exports and Beijing’s fiscal support had both faded.
Beijing’s fiscal policy may turn “more supportive on the margin,” but a large stimulus package is unlikely, unless Beijing sees the economy is in danger of missing its 5% growth target, Zhang added.
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