China’s economic challenges became increasingly apparent in August as key indicators fell short of expectations, highlighting ongoing struggles with domestic demand and production. According to data released by the National Bureau of Statistics (NBS), retail sales in the month rose only 3.4% year-on-year, which was below analysts’ projections of 3.9% growth based on a Reuters poll and a modest decrease from July’s 3.7% growth.
Industrial output also showed signs of weakness, increasing by just 5.2% in August compared to a 5.7% rise in July. This marked the slowest pace of growth since August 2024, despite economists anticipating stability. In terms of fixed-asset investment, growth was a mere 0.5%, significantly lower than the previous 1.6% increase seen from January through July, and notably below the forecasted 1.4%.
Real estate investment faced particularly severe contractions, dropping 12.9% over the first eight months of the year. In contrast, investments in manufacturing and utilities were relatively stronger, with increases of 5.1% and 18.8%, respectively. Yuhan Zhang, a principal economist at The Conference Board’s China Center, noted that the fixed-asset investments in manufacturing had shown “modest and uneven growth,” largely due to sluggish real estate activities among private developers and a rise in state-driven investments in critical sectors such as infrastructure and high technology.
On the employment front, the survey-based urban unemployment rate in August ticked up to 5.3% from 5.2% in July, a change attributed to the influx of recent graduates into the job market. The NBS highlighted a range of external factors contributing to the instability in the economy, urging the implementation of macroeconomic policies aimed at stabilizing employment, businesses, and market expectations. The bureau called for a deepening of reforms, opening up the economy, and fostering innovation to ensure sustained economic growth.
Despite the overall slowdown, there were signs of a shift in consumer spending, particularly in the service sector, which saw gains in travel, leisure, and transport. Retail sales, excluding automobile purchases, grew by 3.7% in August, while consumption growth in rural areas surpassed that in urban settings, standing at 4.6%.
On the inflation front, China’s consumer price index recorded a more significant decline than anticipated, falling by 0.4% year-on-year. Producer prices continued their deflationary trend for the third consecutive year. Fu Linghui, spokesperson for the NBS, expressed caution regarding potential shifts in consumer inflation and acknowledged the uncertainties associated with “imported inflation,” which could stem from a weakened yuan, rising global commodity prices, and increased tariffs.
Among the retail categories, notable growth was recorded in sales of gold, silver, and jewelry, which rose by 16.8%, while sales in sports and entertainment products increased by 16.9%, and furniture sales jumped by 18.6%. Conversely, petroleum, tobacco, and alcohol-related products saw a decline in consumption.
In the stock market, the mainland’s CSI 300 index saw nearly a 1% increase following the release of the economic data. Analysts indicated that the slowdown in growth was largely anticipated, with investors previously factoring in weaker performance for the third quarter. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that while Beijing’s fiscal policy may increasingly lean toward support, a substantial stimulus package is unlikely unless the risks to meeting the targeted 5% growth become dire.
