In July, China's retail sales grew by only 0.6% year-over-year, missing the expected 1.5% increase and slowing from June's 1% growth. Urban fixed-asset investment contracted by 6.7%, worse than the anticipated 6% decline, with real estate investment down 19.2%. Industrial output rose 4.5%, below the 4.8% forecast, while the urban unemployment rate increased to 5.2%.
These figures highlight a deepening supply-demand imbalance in the economy, prompting calls for stronger fiscal measures from the government. Analysts, including Zhiwei Zhang from Pinpoint Asset Management, suggest that the People's Bank of China may need to cut interest rates to stimulate growth.
Goldman Sachs noted that retail sales growth has sharply declined, attributing this to a government subsidy program that has now become a drag on consumption. Additionally, new bank loans fell significantly in July, indicating weak demand and lending reluctance amid a struggling housing market.
A private survey indicated a broader unemployment rate of 10.2%, particularly affecting youth, with the official youth unemployment rate at 14.9%. Investment has been hampered by a prolonged property downturn and tighter local government borrowing constraints.
Despite these challenges, exports rose 23.9% in July, aided by global AI investments, but the trade surplus has raised concerns about potential trade restrictions from other countries. Overall, the data suggests that without effective policy responses, China's economic recovery may face significant hurdles