After a period of deepening crisis in July and early August, the economy lost all momentum in August as major indicators showed a widespread deceleration. Retail sales, industrial output, and fixed-asset investment all missed economists’ forecasts, raising concerns about the country’s ongoing economic challenges. Continued weak domestic demand made it all the more difficult for Beijing to get their braking growth stabilization plan to work.
In August, year-on-year growth in China’s industrial output fell to 5.2%, a sharp drop from the July figure of 5.7%. This marks the most paltry growth since August 2024 and the industrial sector remains a major source of weakness. Among other things, there is Beijing’s ongoing campaign against industrial overcapacity, which has limited production output in sectors from steel to shipbuilding.
That said, retail sales rose a very impressive 3.4% versus a year ago. Even this large growth fell short of what was expected, demonstrating continued consumer hesitance. The statistics bureau noted that “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.”
In fact, fixed-asset investment in China year-to-date grew by a meager 0.5%. That’s a steep drop from the 1.6% growth seen in the first seven months of the year combined. This figure largely undershot economists’ expectations for a 1.4% increase, emphasizing the continued decline of capital inflows and investor confidence. Real estate investment has shrunk dramatically. It was down 12.9% through the first eight months of the year, an even bigger decline than in previous periods.
The urban unemployment rate took a small step back, increasing to 5.3% in August up from 5.2% in July. The impact of this surge on job churn and the state of the labor market, broadly, is concerning. Given these distressing signs, the country’s statistics bureau again stressed the need to reduce uncertainty in jobs and the market. They stated, “We must fully implement macro policies, focus on keeping employment, businesses, market expectations stable, deepen reform and opening up and innovation, so as to foster steady and healthy economic development.”