BEIJING: China’s economy stumbled more sharply than expected in July, with industrial output growth cooling to a more than 17-year low, as the intensifying US trade war took a heavier toll on businesses and consumers.
Activity in China has continued to cool despite a flurry of growth steps over the past year, raising questions over whether more rapid and forceful stimulus may be needed, even if it risks racking up more debt.
After a flicker of improvement in June, analysts said the latest data was evidence that demand faltered across the board last month, from industrial output and investment to retail sales.
That followed weaker-than-expected bank lending and gloomy factory surveys in recent days, along with the return of producer price deflation, reinforcing expectations more policy support is needed soon.
“China’s economy needs more stimulus because the headwinds are pretty strong and today’s data is much weaker than consensus,” said Larry Hu, head of Greater China economics at Macquarie Group in Hong Kong.
“The economy is going to continue to slow down. At a certain point, policymakers will have to step up stimulus to support infrastructure and property. I think it could happen by the end of this year.”
Industrial output growth slowed markedly to 4.8 per cent in July from a year earlier, data from the National Bureau of Statistics showed, lower than the most bearish forecast in a Reuters poll and the weakest pace since February 2002.
Analysts had forecast it would slow to 5.8 per cent, from June’s 6.3 per cent. Washington had sharply raised some tariffs in May.
Infrastructure investment, which Beijing has been counting on to stabilise the economy, also dropped back, as did property investment, which has been a rare bright spot despite worries of potential housing bubbles.
Crude steel output fell for a second straight month, while production of motor vehicles continued to fall by double digits. Hi-tech manufacturing output rose by a slower 6.6 per cent, and the country’s power output edged up just 0.6 per cent.
The industry ministry said last month that China would need “arduous efforts” to achieve its 2019 industrial growth target of 5.5 per cent to 6.0 per cent.
China’s economic growth cooled to a near 30-year low of 6.2 per cent in the second quarter, and business confidence has remained shaky, weighing on investment.
While officials have cautioned it would take time for higher infrastructure spending to kick in, construction growth has been more subdued than expected.
Fixed-asset investment rose 5.7 per cent in January-July from the same period last year, lagging expectations of a 5.8 per cent gain and dipping from the previous reading. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
