Key facts
- China's industrial output grew 4.5% in July, down from 5.3% in June.
- Retail sales increased by 0.6% in July, slowing from 1% in June.
- Extreme weather conditions disrupted market supply and demand in July.
- Premier Li Qiang highlighted insufficient domestic demand as a prominent issue.
- Analysts anticipate a modest growth increase later in the year, aided by fiscal stimulus.
China's economy is showing signs of an extended slowdown, with industrial output and retail sales figures for July falling short of expectations. Factory output grew 4.5% year-on-year, a deceleration from 5.3% in June, while retail sales increased by only 0.6%, down from 1% in the previous month. The National Bureau of Statistics attributed some of the weakness to extreme weather events, including high temperatures and heavy rainfall, which disrupted market dynamics. These figures add pressure on Beijing to implement further stimulus measures to support economic activity, especially after the economy posted one of its lowest quarterly growth rates on record in the three months to June.
Premier Li Qiang acknowledged the persistent problem of insufficient domestic demand and suggested that stabilizing external demand and expanding international economic cooperation could help offset domestic weakness. Analysts, however, anticipate a modest uptick in growth for the remainder of the year, supported by fiscal stimulus measures. The recent data follows a worse-than-expected annualised growth rate of 4.3% for the second quarter, which was below the government's target of around 5% and among the weakest readings since the early 1990s. The boost from AI-related capital expenditure in manufacturing is seen as a positive factor, but overall weakness partly reflects temporary disruptions.