China’s August economic data painted a mixed picture: consumer spending weakened, the investment downturn deepened, while industrial output came in stronger than expected. Authorities also warned of an acute imbalance between supply and demand at home.
Data from the National Bureau of Statistics showed retail sales rose 0.4% in August from a year earlier. That was slower than July’s 0.6% increase and below the 0.8% growth forecast by economists in a Reuters poll.
Industrial output, however, expanded 5.2% last month, accelerating from 4.5% in July and beating economists’ expectations for a 4.8% rise.
For the first eight months of the year, urban fixed-asset investment, which includes property and infrastructure spending, fell 7.2% from a year earlier. That marked a deeper decline than the 6.7% drop recorded in January through July.
The urban survey-based unemployment rate edged up to 5.3% in August from 5.2% in July. It was unchanged from the same period last year.
NBS spokesperson Fu Linghui said the increase in unemployment was linked to the graduation season as more young people entered the job market. He added that employment in manufacturing remained stable, prospects for tech jobs were solid, and the hospitality and catering sectors were still growing.
In an English-language statement, the statistics bureau said the negative impact of the external environment had intensified. It also pointed to an “acute” domestic imbalance between “strong supply and weak demand,” adding that some businesses were still facing operational difficulties.
The bureau called for stronger macro-policy adjustments, measures to boost domestic demand, and further industrial upgrading to support “innovation-led” development.
Growth in the world’s second-largest economy slowed to 4.3% in the second quarter, the weakest pace in more than three years. Even so, policymakers have so far avoided a more aggressive stimulus push, relying instead on incremental support measures.
Further from target
Zhiwei Zhang, president of Pinpoint Asset Management, said the market was waiting for fiscal policy to become more supportive in the third quarter. He expects downside risks to persist because fiscal support takes time to feed through to the economy.
In recent weeks, Beijing has stepped up government bond issuance and expanded loan-interest subsidies for small private businesses and consumers. At the same time, the central bank has pledged more policy support without signaling an explicit rate cut.
Still, efforts to revive appetite for new borrowing have fallen short. China’s credit expansion in August missed forecasts by a wide margin, as government bond financing failed to offset weak demand from companies and households.
New bank loans totaled just 60 billion yuan ($8.95 billion), far below a roughly 400 billion yuan forecast and down from 590 billion yuan a year earlier. Growth in outstanding loans also slowed to a record-low 4.9%.
Oxford Economics estimates third-quarter growth at 4.3%, creating downside risks to its 4.7% full-year forecast and pushing further away from Beijing’s annual target of 4.5% to 5%. The firm said weak consumption and the property slump remained the biggest drags on growth, although exports and high-tech manufacturing were providing some support.
Economists at ANZ Research led by China economist Raymond Yeung said earlier this month that September could be an important policy window to revive business confidence before the October Golden Week holidays. They argued that more fiscal support is needed, though a policy rate cut still looks unlikely.
Analysts nevertheless expect Beijing to refrain from any major ramp-up in stimulus as long as export growth remains strong enough to keep the economy within the target range.
A global investment boom in artificial intelligence has lifted demand for Chinese semiconductors and tech hardware. China’s large oil stockpiles have also helped cushion the impact of rising energy prices, allowing the world’s biggest crude importer to cut back on oil purchases. The country’s official manufacturing PMI also showed that new orders and output both returned to expansion in August after contracting in July.
