China’s retail sales, factory activity lagged in July

China’s retail sales and factory activity grew at a slower pace in July, official data showed on Monday, missing forecasts and highlighting persistent pressure on the world’s second-largest economy.

The country’s leaders have battled sluggish spending in the domestic economy since the end of the Covid-19 pandemic as it threatens overall growth, even as exports and certain high-tech sectors boom.

Beijing is targeting national growth of 4.5-5.0 percent this year, the lowest official goal in decades, but the economy fell short of that in the second quarter.

Data released Monday by the National Bureau of Statistics showed retail sales grew 0.6 percent in July, well below the 1.5 percent forecast in a Bloomberg survey and down from the one percent increase seen in June.

The NBS figures also showed industrial production growth slowed to 4.5 percent on-year in July — down from 5.3 percent the month before and short of the five percent forecast in the Bloomberg survey.

“In July, international geopolitical conflicts persisted and the global energy market was characterised by significant instability and uncertainty,” said NBS spokesman Fu Linghui at a news conference Monday.

Also noting the impact of severe weather last month in some Chinese regions, Fu said authorities had “actively addressed internal and external risks and challenges”.

In another sign of the challenges facing the government, fixed-asset investment in January-July fell 6.7 percent on year, the NBS said.

“The weak economic data indicate that the economy faces further downside risks that require more effective policy response,” wrote Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management.

“The Politburo meeting in late July promised stronger fiscal spending but the implementation and transmission likely takes time,” said Zhang.

Many economists contend that China must shift towards a growth model driven more by household spending than the traditional engines of past decades, including real estate and infrastructure investment.

Trade data for July released this month showed exports and imports soaring, boosted by increased overseas demand for AI-related tech products.

The surge in exports has helped China’s vast manufacturing sector through the prolonged slump in domestic spending.

AFP