China’s Economic Woes Mount With Disappointing Start to Half
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Takeaways by Bloomberg AI
China’s economy got off to a sluggish start in the second half, reviving pressure on policymakers to support growth after industrial output, consumption and investment all fared worse than forecast.
Industrial production expanded 4.5% in July from a year earlier, slowing for the first time in three months and missing estimates, according to data released by the National Bureau of Statistics on Monday. Retail sales growth slowed to 0.6%, also underperforming expectations.
Fixed-asset investment fell more than forecast at a pace of 6.7% year-on-year in the first seven months, after shrinking 5.7% in the first half. The surveyed urban jobless rate climbed to 5.2% from 5% in June.
The July figures suggest growth in gross domestic product likely decelerated to around 4.1%, below the 4.3% level Beijing needs in the second half to reach its annual growth target, according to Jacqueline Rong, chief China economist at BNP Paribas SA. Declines in overall investment and capital spending on infrastructure accelerated from June by slumping at double-digit rates last month, she said.
Lackluster domestic demand and disruptions caused by extreme weather are setting back an economy already weakened by months of fiscal austerity. Growth slid below the government’s annual target of 4.5%-5% in the second quarter despite booming exports, with Bloomberg Economics estimating momentum weakened further at the start of August.
Heavy rainfall and strong winds swept through large swathes of China last month, temporarily shutting down factories and ports, leading to power outages and forcing tens of thousands of people to evacuate. While the disruption may have only a temporary impact, policymakers are likely monitoring the data closely as they assess whether more aid is needed for the economy to ensure their growth goal is within reach.
“It looks like a slate of disappointing data across the board,” said Lynn Song, chief economist for Greater China at ING Bank NV. “Another month of deterioration suggests higher odds for some support in the coming weeks and months to help stabilize growth.”
What Bloomberg Economics Says...
“Economic momentum slowed further in the early third quarter ahead of the late-July Politburo meeting, with all major July indicators falling short of even our low expectations. On the demand side, private consumption softened modestly, while the contraction in investment deepened sharply. This suggests fiscal spending has yet to pick up from its sluggish pace in the first half.”
— Chang Shu and David Qu. For full analysis, click here
Originally slated for publication at 10 a.m., the data release was delayed for five hours after the statistics agency revised its schedule in a break with recent practice. A government ceremony marking the 100th anniversary of late former President Jiang Zemin’s birth was being held in the morning, headlined by a speech from Chinese leader Xi Jinping.
The NBS said that while the economy has remained “stable” so far this year, the external environment is “complicated and volatile” and domestic demand has stayed weak. “Some companies are facing operational difficulties, and the foundation for the economy to stabilize and improve still needs to be consolidated,” it said in a statement accompanying the data release.
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