There are more signs of the Chinese economy’s growing stagnation, with another round of sluggish data for August.
Retail sales, urban investment, and industrial production were all weaker than expected, according to Saturday’s release of the final data for the month from the country’s National Bureau of Statistics.
While exports performed better than usual, imports were lower, car sales dropped another 5%, bank loans were weaker than expected, and both consumer and producer inflation drifted lower, with the latter sinking deeper into deflation for another month.
Steel production slumped, coal production rose due to the ongoing heatwaves, but the property sector continued its decline, with another round of large falls showing no signs of improvement.
China's industrial output in August rose 4.5% year-on-year, down from July’s 5.1% (and below the forecast of a 4.8% rise), marking the slowest monthly growth since March and underlining weakening domestic demand that may prompt fresh measures to stimulate the economy.
The slowdown occurred despite exports rising 8.7%, reaching a 19-month high. Yet, industrial production grew at a slower-than-expected rate, suggesting that domestic demand is weaker than initially thought.
A small 0.5% rise in imports in August further supported the notion of weakening domestic demand during the month.
This was also reflected in the slowing pace of retail sales, a key measure of domestic consumption. Retail sales rose 2.1% in August, down from July's 2.7%, despite the peak of the summer travel season. Prices for fruit, vegetables, and pork all rose sharply in August. Analysts had expected retail sales, which have been weak all year, to grow by 2.5%.
Fixed asset investment rose 3.4% in the first eight months of 2024 compared with the same period in 2023, slightly below the expected 3.5% expansion. It had grown 3.6% during the January–July period. Property investment fell by a steep 10%.
The weak data has fuelled speculation of a potential rate cut or a reduction in the country’s mandated bank reserves.
This weekend, Saturday is a working day in China in exchange for a holiday on Monday. The country is set to celebrate the Mid-Autumn Festival, also known as the Mooncake Festival, from Sunday to Tuesday.
This means that Friday’s one- and five-year loan prime rate announcements will be the first opportunity for a rate cut or reserves asset reduction to be made public.
