China’s July Economic Data Show Persistent Pressure on Growth
China’s retail sales and industrial activity slowed in July, with official figures missing market expectations and highlighting continued pressure on the world’s second-largest economy. Data released Monday by the National Bureau of Statistics showed retail sales rose by just 0.6 percent in July, down from one percent growth in June and well below the 1.5 percent increase forecast in a Bloomberg survey.
Industrial production also weakened. Factory output grew 4.5 percent year-on-year in July, compared with 5.3 percent in June and below the five percent growth economists had expected. The figures add to concerns over weak domestic demand, which has remained a major challenge for Chinese policymakers since the end of the Covid-19 pandemic. While exports and some high-tech industries continue to perform strongly, sluggish household spending has continued to weigh on broader economic growth. China is targeting economic growth of between 4.5 and five percent this year, which would be its lowest official growth target in decades. However, the economy already fell short of that target in the second quarter. NBS spokesman Fu Linghui said international geopolitical conflicts remained a factor in July, while instability and uncertainty in global energy markets also affected economic conditions. Fu also pointed to severe weather that affected parts of China during the month, saying authorities had taken steps to address both domestic and external risks. Another indicator showed the depth of the pressure facing the economy. Fixed-asset investment between January and July fell 6.7 percent compared with the same period a year earlier.
Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, said the weak figures suggested the economy faced further downside risks and would require a stronger policy response. Zhang noted that a late-July Politburo meeting had promised increased fiscal spending, but said the effects could take time to reach the wider economy. Economists have increasingly argued that China needs to move towards a growth model driven more by household consumption rather than its traditional reliance on real estate and infrastructure investment. Despite weak domestic demand, China’s external trade has remained a bright spot. Trade figures released earlier this month showed exports and imports rising sharply, supported by stronger overseas demand for artificial-intelligence-related technology products. The strong export performance has provided support for China’s vast manufacturing sector, helping offset some of the weakness caused by the prolonged slowdown in domestic spending.
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