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.
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.
Consumption growth in rural areas outpaced that in the urban centers, growing 4.6% in August from a year ago.
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.
The mainland’s CSI 300 index advanced nearly 1% after the release of China’s economic data.
As Beijing’s campaign against industrial overcapacity restrained output and weak domestic demand continued, China’s economic slowdown deepened in August, with a number of important indicators falling short of forecasts.
According to data released by the National Bureau of Statistics on Monday, retail sales increased 3.4 percent last month compared to a year earlier. This was slower than the 3.7 percent growth in July and fell short of analysts’ predictions of 3.9 percent growth in a Reuters poll.
According to LSEG data, industrial output growth slowed to 5.2 percent in August after a 5.7 percent jump in July, its lowest level since August 2024. The data should have been the same as the previous month, according to economists.
According to year-to-date data, fixed-asset investment has only increased by 0.5 percent, which is a significant slowdown from the 1 0.6 percent growth during the January to July period and below the 1 0.4 percent growth predicted by economists.
According to government data, the decline in real estate investment within that segment deteriorated, falling 12 to 9% in the first eight months. Compared to a year ago, investments in the manufacturing and utilities sectors, which include fuel, electricity, and water supplies, rose 5 and 18%, respectively.
According to Yuhan Zhang, principal economist at think tank The Conference Board’s China Center, private sector investments have decreased from a year ago, while state-owned businesses have largely supported fixed-asset investments.
“Modest and uneven growth” has been observed in manufacturing investments overall, Zhang added, primarily due to policy-driven state investment in high-tech, infrastructure, and industrial upgrading, while real estate activity is still weak.
In August, China’s survey-based urban unemployment rate was 5point 3 percent, slightly higher than the previous month’s 5point 2 percent rate. According to the statistics bureau, the graduation season is to blame for the increase in the unemployment rate.
“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 stated in a statement published in English.
“To ensure stable and sound economic growth, we must fully execute macro policies, concentrate on maintaining stable employment, business, and market expectations, and further reform, opening up, and innovation. “..”.
August retail sales, excluding car consumption, increased 3 percent over the previous year. With a 4–6% increase in August compared to the same month last year, consumption growth in rural areas exceeded that in urban centers.
At a press conference after the release, NBS spokesperson Fu Linghui stated that it was difficult to determine if consumer inflation had reached a tipping point and that consumer prices would likely continue to fluctuate.
While producer price deflation continued for a third year, China’s consumer price index dropped more than anticipated last month, falling 0.4 percent from a year earlier.
The price of imported goods may rise due to factors like a declining value of the yuan, rising global commodity prices, and higher tariff rates. Fu acknowledged the uncertainty surrounding this phenomenon. He also cited the backing of “anti-involution” policies that aim to curb maker price wars and excessive competition, which will ultimately affect consumer prices.
Gold, silver, and jewelry sales increased 16 percent in August compared to the same month last year, while sales of sports and entertainment products increased 16 percent and furniture sales increased 18 percent. These were the categories that saw the biggest growth.
Petroleum, along with products related to alcohol and tobacco, were the largest consumers of these substances.
Zhang noted that travel, leisure, and transportation were the main drivers of the increase in service consumption, which indicated a slow shift in spending toward services.
As the boost from Beijing’s consumer goods trade-in subsidies began to wane, Lisheng Wang, a China economist at Goldman Sachs, wrote in a note Monday that the slowdown in retail sales growth was primarily caused by a decline in demand for electronics and home appliances.
Wang emphasized that “incremental and targeted easing” is required in the upcoming quarters and predicted that the “unfavourable base effects” would cause consumption growth to slow “more meaningfully” starting in September.
Following the release of China’s economic data, the mainland’s CSI 300 index increased by almost 1%.
“The slowdown is not a surprise to the markets,” stated Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, “because investors had already expected growth to weaken in the third quarter after the boost from exports and Beijing’s fiscal support had both faded.”.
Unless Beijing believes the economy is in danger of missing its 5 percent growth target, Zhang added, Beijing’s fiscal policy may become “more supportive on the margin,” but a significant stimulus package is unlikely.
