China posted the weakest industrial output growth since 2002 and slumping retail sales for last month, as a cyclical slowdown and trade tensions add to the case to roll out more stimulus.
Industrial output rose 4.8 percent from a year earlier and retail sales added 7.6 percent, while fixed-asset investment slowed to 5.7 percent in the first seven months of this year.
While some seasonal effects likely compressed the data, all results were lower than forecast by economists in a Bloomberg survey.
The output data coupled with weak credit demand in the month signal that the world’s second-largest economy is still struggling to stabilize.
A partial delay of US President Donald Trump’s next tranche of tariffs is cheering markets, but adds little in the way of certainty for export companies already reeling from the year-long standoff.
Manufacturing output slowed to the weakest increase since at least 2013, while infrastructure investment growth, a key pillar of the government’s stimulus strategy, weakened to 3.8 percent.
While the trade dispute is accelerating the shift of China’s economy away from factories and toward services and retail, last month’s data showed declining sentiment there as well.
Retail sales continue to be depressed by a contraction in auto sales as buyers in the world’s largest vehicle market scale back.
Last month, China put in place an upgrade in emission standards in areas that count for more than 60 percent of national auto sales.
The earlier-than-expected switch weighed on automakers, as consumers postponed purchases, while discounts up to 50 percent offered by automakers and sellers trying to clear inventory further undermined companies’ profitability.
Even excluding vehicle sales, retail sales growth of 8.8 percent last month was weaker than the year-to-date average of 9.2 percent, the Chinese National Bureau of Statistics said.
The tariff delay “doesn’t really change the outlook on the trade tensions,” said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong. “We expect further policy easing in the coming months to help stabilize growth amid the above headwinds.”
So far, policymakers have relied on a mix of tax cuts to spur spending and targeted monetary incentives for banks to lend to businesses.
That has not been enough to arrest the slowdown, and economists are beginning to call for more aggressive measures, even in the face of rising debt and persistent financial stability risks.
“The top three cyclical drivers, which are exports, infrastructure spending and property investment, are all slowing,’’ said Larry Hu (胡偉俊), head of China economics at Macquarie Securities Ltd in Hong Kong. “More liquidity easing measures such as reserve-ratio cut is likely in the near term, but they are not enough to turn the economy around. The economy would face more headwinds in the coming months.”
The central bank has tweaked the method to evaluate banks’ lending, hoping that more credit would flow to manufacturers and small firms, and cutting the amount of money some banks park at the central bank.
In addition, a revamp to the interest rate framework is seen as a method to lower borrowing costs.
For now, policymakers are not signaling that a cut to the economy-wide benchmark interest rate is on the cards.
Meanwhile, the jobless rate last month rose to 5.3 percent from 5.1 percent in June, a development that the bureau said was due to recent graduates hitting the labor market.