China's economy continued to slow in August
China's economic growth continued to slow in August, according to data from the country's National Bureau of Statistics. According to them, one of the key problems for the Chinese authorities remains the weakness of domestic demand - this is indicated, in particular, by the slowdown in retail sales growth in August to 2.1% year-on-year (2.7% in July, the consensus forecast is 2.5%). In August, sales of everyday goods grew more slowly than in July, while the decline in trade in construction materials and cars continued. The reduction in base rates by the People's Bank of China was also not reflected in the domestic consumption statistics (see Kommersant of July 23). This may be due to the fact that the regulator's move was cautious - the reduction was only 10 basis points. In August, the volume of new bank lending expanded - but due to loans from producers, not consumers.
Weak domestic demand amid unclear external prospects (see Kommersant of September 11) is the reason for the slowdown in industrial production growth (for the fourth month in a row, see chart). It should be noted that the last time such a long period of slowdown was observed was in the fall of 2021 and was due to COVID lockdowns. In August 2024, the indicator was the lowest since March at 4.5% after 5.1% in July; experts surveyed by Trading Economics expected growth of 4.7% on average. Among the industries that noticeably declined compared to July were the agro-industrial complex and ferrous metallurgy; most other sectors recorded a slowdown in growth. Against the backdrop of such dynamics in industrial production, unemployment in China rose to 5.3% in August — the highest since February 2024 (5.2% in July, 5% in June).
Growth in fixed capital investment amid unclear demand prospects also slowed to 3.4% in August from 3.6% in July. With a slowdown in investment growth in certain sectors (including infrastructure), a decline was expectedly recorded in real estate: investment in August, as in July, fell by 10.2% year-on-year. Taken together, the August data is seen by both internal and external observers as an argument for deploying additional measures to support the economy. The current dynamics of most components contributing to GDP indicate that China may not achieve the target 5% economic growth by the end of the year.
