BEIJING: China’s factory output growth in July fell to its weakest level in eight months, while retail sales slowed sharply, underscoring the mounting challenge for policymakers seeking to stabilise the economy amid sluggish domestic demand and external risks.
Data from the National Bureau of Statistics (NBS) on Friday (Aug 15) showed industrial production rose 5.7% year-on-year in July, down from June’s 6.8% and below the 5.9% increase forecast in a Reuters poll. This marked the lowest reading since November 2024.
The slowdown comes despite a temporary US-China trade truce reached in mid-May — extended by another 90 days this week — which has prevented US tariffs on Chinese goods from climbing to triple-digit levels. However, weak demand and ongoing factory-gate deflation continue to erode manufacturers’ profits. The NBS reported earlier this month that the producer price index dropped 3.6% in July from a year earlier, matching June’s near two-year low.
Policymakers in Beijing have recently pledged more measures to boost domestic consumption and rein in excessive price competition as they aim to steer growth toward the government’s 2025 target of around 5%.
Retail sales, a key measure of consumer spending, rose just 3.7% in July — the weakest pace since December 2024 — down from June’s 4.8% and missing expectations of a 4.6% gain.
Fixed asset investment rose 1.6% in the first seven months of the year compared with the same period in 2024, below forecasts for a 2.7% increase and slower than the 2.8% growth recorded in the first half.
Although policy support and front-loaded exports during the trade truce have so far helped China avoid a sharper downturn, analysts warn that tepid domestic demand and global uncertainties will weigh on growth in the coming months. Economic activity has also been hampered by extreme weather, including record heatwaves, storms, and floods that disrupted factory output and everyday business operations.
A Reuters poll projects China’s GDP growth to slow to 4.5% in the third quarter and 4.0% in the fourth, with full-year 2025 growth estimated at 4.6% — below last year’s 5.0% and short of the government’s target. The slowdown is expected to extend into 2026, with growth forecast at 4.2%.
Source: Reuters
