Mainland China’s retail sales growth slowed sharply in July, statistics showed Friday, missing expectations in a disappointing sign for the world’s second-largest economy as the mainland China authorities look to consumer demand to push growth.
Retail sales rose 10.2 percent in the month, the National Bureau of Statistics (NBS) said, a marked slowdown from June’s 10.6 percent increase and below the median forecast of 10.5 percent in a Bloomberg News poll of economists.
Beijing is looking to retool the economy from a reliance on investment spending and exports to one driven more by consumer demand, but the transition is proving bumpy and gross domestic product growth is slowing.
China is a key driver of the world economy but grew at its slowest rate in a quarter of a century last year, and has decelerated further since then.
Industrial output in the Asian giant rose 6.0 percent in July over the year before, the NBS said, while fixed asset investment (FAI), a gauge of infrastructure spending, rose 8.1 percent in the first seven months of the year.
Those figures also missed expectations of 6.2 percent and 8.9 percent respectively.
Analysts were disappointed. Zhao Yang of Nomura called the figures an “across-the-board slowdown” that showed more weakness than expected. The investment figures were consistent with a deep contraction in imports that “points to sluggish domestic investment demand.”
Looking ahead, factory output will face further downward pressures due to efforts to cut overcapacity, analysts with ANZ Research said in a note.
Industrial production “may further dampen” this quarter, they added, as a result of flooding around the Yangtze River and suspended factory production in Zhejiang province, one of China’s most developed areas, due to a forthcoming G-20 summit in Hangzhou.
Unswervingly Advance
The NBS said in a statement China’s economy was “basically steady” in July but said that “serious disasters” from flooding and high temperatures in some parts of the country caused some indicators to slow.
“However, overall economic development kept performing in a proper range with steady pace, as a result of stable employment and prices, deepened supply-side structural reform and accumulated new impetus,” it said.
China should “unswervingly advance” supply-side structural reform and expand aggregate demand, it added.
NBS spokesman Sheng Laiyun said it was “reasonable” for FAI growth to fall long-term as the economy shifts away from traditional heavy industries toward the service sector, which does not require as intensive investment.
“The trend is good,” Sheng told a news conference. “Even though economic growth dropped slightly, the economy is stable and making steady progress, and the steady trend toward improvement has not changed.”
Sheng acknowledged, however, that China faces “downward pressure” from weak global demand as Beijing carries out a marathon effort to nurture consumer-driven growth and reduce reliance on trade and investment.