China's economy slumps in August as consumer, export demand sags
Employees work on a drilling machine production line at a factory in Zhangjiakou, Hebei province, China on Nov 14, 2018. (File photo: Reuters/Stringer)
BEIJING: China's factory output growth slowed to its weakest pace in a year in August, while retail sales fell to a nine-month low, keeping pressure on Beijing to roll out more stimulus to fend off a sharp slowdown in growth in the US$19 trillion economy.
The disappointing data suggest policymakers will need additional near-term fiscal support to hit their annual growth target of "around 5 per cent", with manufacturers awaiting more clarity on a US trade deal and domestic demand curbed by a wobbly job market and a protracted property crisis.
Industrial output grew 5.2 per cent year-on-year, National Bureau of Statistics data showed on Monday (Sep 15), the lowest reading since August 2024 and weaker than a 5.7 per cent rise in July. It also missed forecasts for a 5.7 per cent increase in a Reuters poll.
Retail sales, a gauge of consumption, expanded 3.4 per cent in August, the slowest pace since November 2024, and cooling from a 3.7 per cent rise in the previous month. They missed a forecast gain of 3.9 per cent.
"The strong start to the year still keeps this year’s growth targets within reach, but similar to where we were at this time last year, further stimulus support could be needed to ensure a strong finish to the year," Lynn Song, chief economist, Greater China at ING.
"While it is too early to gauge the impact of the consumer loan subsidies coming into effect in September, it is likely that more policy support is still needed, given the broader slowdown across the board. We continue to see a high possibility for another 10bp rate cut and 50bp RRR cut in the coming weeks."
With domestic demand weak and a crackdown on speculation and heavy debt dragging the property sector into a prolonged slump, authorities are leaning on manufacturers to find new markets to offset US President Donald Trump’s unpredictable trade policy.
Separate data this month showed factory owners have had some success diverting US-bound shipments to Southeast Asia, Africa and Latin America, but the drag from the property crisis continues to offset efforts to steady the economy.
New home prices fell 0.3 per cent in August from the previous month and 2.5 per cent on an annual basis, a different NBS dataset showed.
Chinese households, which saw their wealth shrink in the real estate downturn, have tightened their purse strings while business confidence has faltered, dampening the job market.
Unemployment edged up to 5.3 per cent in August, from 5.2 per cent a month prior and 5.0 per cent in June.
Employers are being squeezed by aggressive price cuts, which officials are cracking down on as competition reaches a point where diminishing returns are threatening economic stability.
Manufacturing activity has also been hit by extreme weather over the summer, which was the hottest since 1961 and compounded by the longest rainy season for the same period.
Fixed asset investment grew 0.5 per cent in the first eight months compared with the same period last year, versus an expected 1.4 per cent increase and a 1.6 per cent expansion in the January-to-July period.
Zheng Shanjie, head of China's state planner, said last week that Beijing would make full use of fiscal and monetary policies and improve its policy toolkit to help achieve annual economic targets.
He also pledged to carry out regular policy research and preparation and called for fast-tracking new financial instruments in the second half of the year.
