China: Real-sector data for July is soft
Industrial output expanded 5.1% in year-on-year terms in July, which was a deterioration from June’s 5.3% increase and slightly below market expectations. The result came on the back of weaker manufacturing and energy output.
Retail sales growth sped up from 2.0% in June to 2.7% in July, marginally above market expectations.
Thirdly, in January–July, fixed-asset investment increased 3.6%, which was below January–June’s 3.9% expansion and marked the worst result since December 2023. The reading was notably below market expectations, with stagnant private investment partly offsetting robust investment by state firms.
Finally, indicators for housing prices, sales, starts and investment remained deep in the red, suggesting that the property sector’s downward spiral continued in July.
On the economy, Nomura analysts said:
“Some new headwinds appear to be affecting the economy, putting downward pressure on growth in H2, while some existing headwinds remain strong. These new headwinds include plummeting equity financing, the PBoC’s efforts to raise bond yields, strengthening tax collection, a surge in penalties, the hiking of utility prices, and a crackdown on pay in the financial sector. The ongoing headwinds include the contracting property sector, the tapering of post-Covid pent-up consumption demand, and the cooling of investment frenzy in lithium-ion batteries, solar and EVs.”