Chinese economy weakens as consumer spending and factory output slows

"The disappointing data adds pressure on Beijing to roll out more stimulus to fend off a sharp slowdown in the world's second-largest economy, which has struggled to fully recover from the Covid-19 pandemic, with a debt crisis denting its once-booming property sector and exports facing stronger headwinds. Economists were split over whether policymakers should introduce more near-term fiscal support to hit their annual 5% growth target."

"Retail sales, a gauge of consumption, expanded 3.4%, the slowest pace since November 2024, and cooling from a 3.7% rise in the previous month. The activity data point to a further loss of momentum, Zichun Huang, China economist at Capital Economics, wrote in a note. While some of this reflects temporary weather-related disruptions, underlying growth is clearly sliding, raising pressure on policymakers to step in with additional support."

Industrial output grew 5.2% year-on-year, the weakest reading since August 2024 and below July's 5.7% rise. Retail sales expanded 3.4%, the slowest pace since November 2024 and down from 3.7% previously. Growth momentum has slowed amid a persistent property-sector debt crisis, weaker exports and an uncertain jobs market that has curbed domestic demand. Factory activity was disrupted by the hottest conditions since 1961 and an unusually long rainy season. Manufacturers have diverted some US-bound shipments to south-east Asia, Africa and Latin America. Economists are split on the timing and size of additional fiscal stimulus to secure a strong year-end.

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