BEIJING, Sept 14 (Askume) – China’s industrial output growth fell to a five-month low in August, while retail sales and new home prices also weakened, highlighting the need for more stimulus to bolster the world’s second-largest economy.
Saturday’s disappointing data was reminiscent of Friday’s weak bank credit data and underscored the weak pace of third quarter growth in the world’s second-largest economy.
Data released by the National Bureau of Statistics on Saturday showed industrial value added rose 4.5% year-on-year in August, slower than the 5.1% increase in July and the lowest growth rate since March.
This was lower than the 4.8% rise forecast in a Askume survey of 37 analysts.
Retail sales, a key indicator of consumption, rose just 2.1% in August, down from a 2.7% increase in July during the peak summer travel season. Analysts had expected weak retail sales to rise 2.5% for the full year.
“Growth is slowing…domestic demand remains constrained,” said Jing Zhaopeng, senior China strategist at ANZ Bank.
“Based on the current data flow, the third quarter GDP is likely to be lower than the second quarter. We expect large-scale stimulus measures to be released soon.”
President Xi Jinping on Thursday urged officials to work toward achieving the country’s annual economic and social development goals, while more measures are expected to boost a slowing economic recovery, state media reported.
Slowing economic activity in China has caused global brokerage firms to cut their forecasts for China’s 2024 growth rate, which is below the government’s official target of 5%.
Chinese consumers are cutting back on spending amid a prolonged slowdown in the property market. Some expertsIt has also been recommended to issue shopping vouchers to curb this trend .
Prime Minister Li Jiang said last month that the country would focus on encouraging consumption and consider measures to boost household incomes.
Last week, a central bank official said China still had room to reduce the cash held in its banks , but faced some hurdles in cutting interest rates.
No improvement in the real estate industry
Real estate investment grew 3.4% annually in the first eight months of 2024, while the projected growth was 3.5%. It rose 3.6% from January to July.
China’s economic performance remained stable last month, but high temperatures and natural disasters hurt growth, National Bureau of Statistics spokesman Liu Aihua said at a press conference on Saturday.
In August, cash-strapped local governments quickly issued bonds to raise funds for the construction of major projects. Liu said the increase in bond issuance and policy measures will support investment growth.
Meanwhile, the troubled real estate sector remains a major drag on growth. Prices of new homes in China fell the most in more than nine years in August . Only two of the 70 cities surveyed reported quarterly and year-on-year home price increases in August.
Both property sales and investment declined in the first eight months of the year.
Even as Beijing steps up efforts to rescue the property market, many analysts say more aggressive measures are needed to help debt-ridden developers and lure potential homebuyers back to the market.
Analysts at Nomura expect tougher measures to be taken in the fourth quarter.
