China’s industrial output accelerated in August but weaker consumer spending and a deepening investment slump highlighted growing imbalances in the world’s second-largest economy.
Industrial output rose 5.2% year-on-year in August, up from 4.5% in July and ahead of economists’ expectations for 4.8%, according to data from the National Bureau of Statistics.
However, retail sales growth slowed to 0.4% from 0.6% in July, falling short of the 0.8% expected by economists and pointing to continued weakness in domestic demand.
The weakness was also evident in investment, with fixed-asset investment falling 7.2% in the first eight months of the year, its steepest decline since April 2020.
Property investment dropped 19.9% over the same period, although investment in high-tech industries rose 5.2% as the global artificial intelligence boom continued to support spending in the sector.
The latest figures add pressure on Beijing to provide further support as businesses remain reluctant to commit new capital and household spending struggles to gain momentum.
“We have lowered our 2027 growth forecast to 4.3%, reflecting a more prolonged property downturn which is likely to keep growth subdued despite stronger public investment,” said Sheana Yue, senior economist at Oxford Economics.
China is targeting economic growth of between 4.5% and 5% this year.
The economy has also faced pressure from weak factory and services activity, subdued credit demand and disruptions caused by extreme weather. Four typhoons made landfall in China during August, affecting operations in the country’s eastern manufacturing and logistics belt.
Beijing has responded with faster government bond issuance and expanded loan interest subsidies for small private firms and consumers, while the central bank has pledged further policy support without signalling explicit cuts to policy rates or banks’ reserve requirement ratio.
“The market is waiting for the fiscal policy to become more supportive in the third quarter after the economy slowed in the second quarter,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.
Reuters
