BEIJING: China’s economic momentum weakened a notch in August, with a continued slowdown in investment overshadowing solid retail sales and industrial production data.
Fixed-asset investment rose 5.3% in the first eight months over the same period a year earlier, below estimates and slowing from July.
While that signals a continued slowdown in output ahead, industrial production and retail sales both accelerated, expanding 6.1% and 9.0% in August from a year earlier. The surveyed jobless rate declined for the first time since May.
Today’s data indicate that while industrial output and consumption are improving slightly, the policies the government has announced in recent months to spur investment have yet to take root.
Credit data in August were stronger than expected overall, although the growth in bank lending is still slowing due to the effects of the campaign to cut leverage.
“China’s economy is on a gradual deceleration trend, but at this moment it’s still fine.
“The government won’t change the direction of deleveraging. They will only change the pace of it, because the economy is still fine at this stage,” Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd, said on Bloomberg TV.
Infrastructure investment slowed to 4.2% in the first eight months, the slowest since the data series started in 2014. That means policies to expedite such spending haven’t fed through to construction yet.
Infrastructure and fixed asset investment are unlikely to pickup soon, although it may stabilise in the next few months, according to statistics bureau spokesman Mao Shengyong.
The government is boosting investment in western regions and rural China, and that will help stabilise infrastructure investment, he said at a briefing after the data was released.
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“Despite the credit easing measures, the demand side has failed to catch up.
“It takes time. On the bright side, we see that both corporate and local governments have increased bond issuance. Activity will likely pick up later this year,” said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong.
Output of computer and communication gadgets surged 17.1% from a year earlier, hinting at front-loading by exporters assuming that more tariffs from the US will hit.
What our economists say… China’s economic activity was broadly stable in August, with activity readings showing the economy has avoided a sharp deceleration for now, Bloomberg Economics Chang Shu and Qian Wan wrote in a note.
However, with the funding shortage in the economy still acute and no end in sight for the trade war, the government will step up spending on infrastructure and the central bank will act to facilitate lending.
There are some signs that one risk to the economy may be receding, with China and the US talking about resuming talks over their trade dispute.
Although the differences between the two sides are still vast and trust is limited after the collapse of earlier talks in May, if successful, the negotiations would remove one threat for the economy and the government.