China’s summer of economic weakness likely stretched into August
The youth unemployment rate will be keenly watched after surging to 17.8% in July
[BEIJING] China’s economy likely endured another month of weakness in August, with a slowdown in industrial output and investment offsetting a slight improvement in retail sales.
Official data due Monday (Sep 15) will show factory production increased 5.6 per cent in August from a year earlier, down from a 5.7 per cent gain in the previous month, according to the median forecast in a Bloomberg survey. Retail sales growth is expected to pick up slightly to 3.8 per cent after the weakest gain all year, while fixed-asset investment probably had its slowest expansion in almost half a decade.
The extent of the economic slowdown will likely draw scrutiny from Chinese policymakers, who have so far shown little sign of preparing additional stimulus for the economy as overseas sales boom. While China has vowed to boost domestic consumption this year, exports still contributed to almost a third of growth during the first half, when gross domestic product expanded 5.3 per cent.
For now, third-quarter GDP growth is “tracking at slightly below 5 per cent, so the pressure to add stimulus may only be growing more visibly going into winter”, said Michelle Lam, Greater China economist at Societe Generale.
While strong exports have provided support for growth this year, private consumption has been weaker despite efforts to boost retail sales, and the housing market continues to shrink and undermine overall demand.
While holding back on announcing any massive new measures to juice growth, Beijing has also ramped up efforts to curb cut-throat competition among businesses, a policy that will likely cut into output. The government also allocated a new batch of funding in late July for its programme of subsidies for consumer goods.
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The data for the month has been mixed so far, with one indicator for factory activity still in contraction, while another returned to expansion, although just barely.
The housing market has continued to slump, however, with sales by the largest 100 developers falling almost 18 per cent from a year earlier in August after a 24 per cent drop in July.
That continued contraction is flowing through to property investment, which likely shrank faster in the January to August period than in the first seven months of the year, pulling down on overall investment, the survey showed.
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Urban joblessness is expected to be unchanged at 5.2 per cent last month. The youth unemployment rate will be keenly watched after surging to 17.8 per cent in July. BLOOMBERG
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