China’s economic momentum weakened in August as industrial production and consumer spending recorded their lowest growth rates since late 2024, increasing pressure on policymakers to introduce additional stimulus measures. Official figures released on Monday revealed that factory output rose by 5.2% year-on-year, down from 5.7% in July and falling short of market expectations. This marked the weakest performance since August 2024. Meanwhile, retail sales climbed only 3.4%, a slowdown from the previous month’s 3.7% and below the forecasted 3.9%, signaling subdued household demand. n nThe data adds uncertainty around Beijing’s goal of achieving approximately 5% GDP growth for the year. Although the economy started strong in the first half, recent indicators suggest a broad-based cooling. Fixed-asset investment grew just 0.5% in the first eight months of the year, a significant deceleration from the 1.6% growth seen through July and the weakest pace outside of pandemic-related disruptions. n nAnalysts are divided on whether further fiscal or monetary action will be necessary. Lynn Song, ING’s chief economist for Greater China, noted that while the early-year performance keeps the annual target within reach, additional support may be required to sustain momentum. She anticipates a possible 10 basis point cut in interest rates and a 50 basis point reduction in reserve requirement ratios in the near term. n nEfforts to boost domestic consumption, including new consumer loan subsidies introduced in September, have yet to show measurable impact. At the same time, the prolonged property sector downturn continues to weigh on household wealth and confidence. New home prices declined 0.3% month-on-month and 2.5% annually, according to National Bureau of Statistics data. The job market also showed signs of strain, with the urban unemployment rate rising to 5.3%, the highest in six months. n nZhaopeng Xing of ANZ suggested that while economic momentum is weakening, it may not yet be severe enough to trigger immediate large-scale stimulus. However, Xu Tianchen from the Economist Intelligence Unit warned that fourth-quarter indicators could deteriorate further due to base effects, increasing the likelihood of policy interventions such as monetary easing, accelerated debt issuance, or expanded fiscal spending. n nZheng Shanjie, head of China’s state planning agency, recently affirmed that authorities would fully leverage fiscal and monetary tools to meet annual objectives. External factors, including extreme weather conditions—the hottest summer since 1961 and the longest rainy season on record—also disrupted manufacturing activity. n nUnderlying structural challenges, such as fading fiscal stimulus and efforts to reduce industrial overcapacity, continue to hinder recovery. Zichun Huang of Capital Economics cautioned that even if further easing occurs, it may not be sufficient to reverse the current downward trend. n— news from Reuters n
— News Original —nChina’s economy slumps in August, casts doubt on growth targetnBEIJING, Sept 15 (Reuters) – China ‘s factory output and retail sales reported their weakest growth since last year in August, keeping pressure on Beijing to roll out more stimulus to fend off a sharp slowdown in the world ‘s second-largest economy. n nThe disappointing data split economists over whether policymakers would need more near-term fiscal support to hit their annual growth target of “around 5%,” with manufacturers awaiting more clarity on a U.S. trade deal and domestic demand curbed by a wobbly job market and property crisis. n nSign up here. n nIndustrial output grew 5.2% year-on-year, National Bureau of Statistics data showed on Monday, the lowest reading since August 2024 and weaker than a 5.7% rise in July. It also missed forecasts for a 5.7% increase in a Reuters poll. n nRetail sales, a gauge of consumption, expanded 3.4% in August, the slowest pace since November 2024, and cooling from a 3.7% rise in the previous month. They missed a forecast gain of 3.9%. n n”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,” said Lynn Song, chief economist, Greater China at ING. n n”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.” n nFixed-asset investment also grew at a slower-than-expected 0.5% pace in the first eight months year-on-year, from 1.6% in January-to-July, marking its worst performance outside the pandemic. n nAuthorities are leaning on manufacturers to find new markets to offset U.S. President Donald Trump’s unpredictable trade policy and weak consumer spending. n nSeparate data this month showed factory owners have had some success diverting U.S.-bound shipments to Southeast Asia, Africa and Latin America, but the drag from the property crisis continues to offset efforts to steady the economy. n nZhaopeng Xing, senior China strategist at ANZ, said that while the data showed momentum in the world ‘s second-largest economy was weakening, it was not yet bad enough to trigger a new round of stimulus. n n”Policies and measures to support service consumption are expected to offset the impact of aggregate demand this month,” he said, adding an official crackdown on firms aggressively cutting prices made domestic demand appear worse than it was. n nHOUSEHOLD PRESSURE n nChinese households, which have seen their wealth shrink in the real estate downturn, have tightened their purse strings as business confidence falters, dampening the jobs market. n nUnemployment edged up to a six-month high of 5.3% in August, from 5.2% a month prior and 5.0% in June. n nMeanwhile, new home prices fell 0.3% last month from July and 2.5% on an annual basis, a different NBS dataset showed. n n”We had expected that retail sales growth would have stayed above 4% before September under consumer subsidies, so what happened these months was a disappointment,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. n nXu said that China ‘s main economic indicators could worsen over the fourth quarter due to base effects. Officials typically reach for further policy support towards the year end to ensure the economy hits the growth target. n n”This will raise the likelihood of stimulus in the fourth quarter, including monetary easing, frontloading of debt issuance to this year, and possibly a fiscal expansion,” he added. n nZheng Shanjie, head of China ‘s state planner, said last week that Beijing would make full use of fiscal and monetary policies and improve its toolkit to achieve annual targets. n nWeather has also not helped, with manufacturing activity affected by the hottest conditions since 1961 and the longest rainy season for the same period. n n”But there are more fundamental headwinds too, including fading fiscal support and efforts to curtail overcapacity,” said Zichun Huang, China economist at Capital Economics. n n”While the weak data may trigger some additional policy easing over the coming months, the likelihood is that this proves insufficient to turn things around,” she added. n nReporting by Kevin Yao, Joe Cash; Additional reporting by Yukun Zhang; Editing by Sam Holmes