[1/2]A worker welds at a market under construction in Kunming, Yunnan province on August 12, 2015. REUTERS/Wong Campion/File Photo
BEIJING, Aug 15 (Reuters) – Broad Chinese data on Tuesday showed the economy slowed further last month, intensifying pressure on already faltering growth and prompting authorities to cut key policy rates to boost activity.
Less than an hour before releasing a set of July data, China’s central bank unexpectedly cut key policy rates for the second time in three months, underscoring the rapid loss of momentum in the post-Covid economic recovery that has rocked global financial markets.
Industrial production grew 3.7% from a year earlier, slowing from the 4.4% pace seen in June, data from the National Bureau of Statistics (NBS) showed on Tuesday. A 4.4% increase was below expectations in a Reuters poll of analysts.
Retail sales, a measure of consumption, rose 2.5% from a 3.1% increase in June and missed analysts’ forecasts of 4.5% growth despite the summer travel season. This is the slowest growth since December 2022.
“All key activity indicators fell short of consensus expectations in July, with most stagnating or barely expanding on a month-on-month basis,” said Julian Evans-Pritchard, economist at Capital Economics.
He warned that the economy could slip into recession if policy support is not stepped up soon, as financial problems from real estate developers such as Country Garden could soon drag down the housing market.
Asian shares fell and the dollar was firmer after weak Chinese data and recent policy easing measures.
Following the rate cuts, China’s major state banks were seen selling U.S. dollars and buying yuan in an attempt to stem the currency’s rapid decline, three people with direct knowledge of the matter said. Sovereign bond yields fell to three-year lows, but benchmark stock indexes were slightly weaker, perhaps on expectations of more stimulus.
Policymakers last month unveiled stimulus measures such as boosting consumption of autos and home appliances, pledging to support the private sector and easing some asset restrictions.
However, continued drag in the property sector, rising local government debt pressures, high youth unemployment rates and cooling foreign demand continue to be key obstacles to fostering a sustainable economic recovery.
More stimulation
Tuesday’s data showed the broader economy was weak last month and came on top of gloomy data last week, including disappointing trade and consumer price numbers and record low credit growth. Support activities.
“Today’s data shows how difficult it is for China’s economy to sail against the wind, with challenges from all dimensions and effective policy support from some fronts,” said Bruce Pang, chief economist at Jones Lang LaSalle.
Other data on Tuesday showed fixed asset investment expanded 3.4% in the seven months to 2023, beating expectations for a 3.8% rise from the same period a year earlier. It grew by 3.8% in the January-June period.
Investment in the property sector fell 8.5% year-on-year in January-July, down 7.9% in January-June, extending its decline for the 17th consecutive month.
Demand for the property sector, once a pillar of economic growth, has remained weak in recent weeks. The ruling Communist Party’s top decision-making body, the Politburo, said last month that timely improvements to asset policies were necessary to respond to significant changes in market supply and demand.
The nationwide survey-based unemployment rate rose slightly to 5.3% from 5.2% in June.
After the youth unemployment rate rose to 21.3% in June, NBS spokesperson Fu Linghui told a press conference on Tuesday that the bureau will stop publishing the survey-based unemployment rate for 16-24-year-olds from August. Its employment statistics.
($1 = 7.2838 Chinese Yuan Renminbi)
Additional reporting by Albee Zhang and Liangping Gao; Editing by Sri Navaratnam
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