China's economic recovery sputters as consumption, output lose steam

China's economy is showing signs of sputtering recovery, with July data indicating a loss of momentum in both consumption and industrial output. Retail sales experienced a significant deceleration, growing by only 0.6% year-on-year in July. This figure represents a slowdown from the previous month and fell below analyst forecasts, underscoring persistent weakness in domestic demand. Industrial output also decelerated, increasing by 4.5% in July, which was also short of expectations. These figures follow a slowdown in the second quarter, which saw growth hit a three-and-a-half-year low, intensifying pressure on policymakers to introduce additional stimulus measures to bolster the economy.

Further complicating the economic picture, the housing sector continues its downward trend. New home prices in China fell by 0.1% month-on-month in July, mirroring the decline seen in June. On an annual basis, new home prices were down 3.2%. The data from 70 surveyed cities indicates that only 17 experienced price gains, highlighting the ongoing adjustment and challenges within the property market. Extreme weather conditions have also been cited as a factor contributing to the slowdown in industrial output and retail sales.

The combination of weak domestic demand, a struggling housing sector, and the impact of extreme weather presents a challenging environment for China's economic policymakers. The recent data suggests that existing stimulus measures may not be sufficient to reignite robust growth, potentially necessitating more substantial interventions to support economic activity and consumer confidence.