China’s Economic Slowdown Intensifies: Factory Output and Retail Sales Fall Short of Expectations
China’s economy showed signs of further weakening in August, as both factory output and retail sales fell short of expectations. The National Bureau of Statistics (NBS) reported a year-on-year industrial output increase of 5.2%, a decline from July’s 5.7% and below the anticipated 5.7%. This slowdown, the weakest since last August, is attributed to extreme summer weather conditions and a persistent property market slump, prompting calls for renewed government stimulus measures.
Consumer Spending Weakens Further
In August, retail sales, a crucial indicator of consumer demand, grew by only 3.4%, down from July’s 3.7% and below the expected 3.9%. This marks the slowest growth since November, reflecting households’ cautious spending habits amid declining property wealth and a sluggish job market. The ongoing downturn in the real estate sector has led consumers to tighten their budgets, while business confidence has also waned. The labor market remains under pressure, contributing to the overall decline in consumer spending.
Government Cautions on Risks Ahead
The NBS characterized the economy as “generally stable” in August but acknowledged the presence of numerous “unstable and uncertain factors” in the external environment. Fu Linghui, a spokesperson for the NBS, warned that the economy faces multiple risks and challenges. He emphasized the need for policymakers to implement macroeconomic policies effectively, focusing on stabilizing jobs, businesses, markets, and public expectations. Additionally, the urban unemployment rate edged up to 5.3% in August, compared to 5.2% in July, highlighting the ongoing challenges in the job market.
Property Slump Deepens
The property market continues to be a significant drag on economic growth. Official data revealed that new home prices fell by 0.3% month-on-month in August and decreased by 2.5% compared to the previous year. Property investment from January to August dropped by 12.9% year-on-year, extending a 12% decline observed in the first seven months of the year. Furthermore, new home sales by floor area decreased by 4.7% during the first eight months of 2023, indicating a deepening slump in the sector.
Beijing Pushes Stimulus Measures
In response to the declining consumer confidence and eroded household wealth, the Chinese government is actively seeking to stimulate spending. Last month, authorities introduced a year-long subsidy plan aimed at covering interest on personal consumer loans. Additionally, a trade-in program for home appliances has been implemented to boost sales, although some provinces have already suspended parts of the initiative due to funding shortages. As the economy faces ongoing challenges, the government is under pressure to take decisive action to support growth and stabilize the market.
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