BEIJING, Sept 14 (Askume) – China’s industrial output growth fell to a five-month low in August, with retail sales and new home prices weakening further, reducing the need for aggressive stimulus to bolster the economy and meet annual growth targets.
The lackluster data released on Saturday was reminiscent of weak bank credit data on Friday and highlighted the weak pace of growth in the world’s second-largest economy of $18.6 trillion in the third quarter.
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.
Despite peak summer travel, retail sales, a key measure of consumption, rose only 2.1% in August, down from July’s 2.7% increase. Analysts had expected weak retail sales to grow 2.5% this year.
“Growth is slowing… domestic demand remains constrained,” said Jing Zhaopeng, senior China strategist at ANZ Bank.
China’s refining output fell for a fifth consecutive month, while crude steel output fell 6.1% in August compared with July, reflecting sluggish demand.
The slowdown in economic activity in China has led global brokerage firms to lower their growth forecasts for China in 2024 to below the government’s official target of 5%.China’s economy grew 4.7% in the second quarter .
“Based on current data flows, third quarter GDP is likely to be lower than the second quarter. We expect large-scale stimulus measures to come soon,” Jing said.
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 slow economic recovery, state media Needed reported.
“As we enter the final stage of the third quarter, time is running out for policymakers to take measures to stimulate the economy given the many challenges we face,” said Lin Song, chief China economist at ING.
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 .
Premier Li Jiajing said last month that the country would focus on stimulating 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.
However, 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.
China may lower interest rates on more than $5 trillion of outstanding mortgages as soon as this month to boost its real estate market, according to Bloomberg.
Even as Beijing has stepped 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.
Some other economic indicators released on Saturday also disappointed. The National Bureau of Statistics said China’s national survey unemployment rate rose to 5.3% in August from 5.2% the previous month. Additionally, it said college graduates enter the job market in search of job opportunities.
One good thing for China lately has been exports , but analysts are unsure how long this trend of export growth will last, given rising trade tensions with some countries and regions .
Zhang Zhiwei, chief economist at Pinpoint Asset Management, said investors will turn their focus to thinking about growth in 2025.
“When global economic growth slows down and China’s exports come under pressure next year, will the tight fiscal policy stance continue?”
