BEIJING: Growth of China’s industrial output slowed much more than expected to 4.8% in July from a year earlier, official data showed on Wednesday, in the latest sign of faltering demand in the world’s second-largest economy as the United States ramps up trade pressure.
The July pace was the slowest since February 2002. Analysts polled by Reuters had forecast industrial output would rise 5.8% from a year earlier, slowing from 6.3% in June.
Fixed-asset investment for the first seven months of the year rose 5.7%, according to data published by the National Bureau of Statistics, compared with a 5.8% rise forecast by analysts.
Private sector fixed-asset investment, which accounts for about 60% of the country’s total investment, grew 5.4% in January-July, compared with a 5.7% rise in the first sixth months of 2019.
Retail sales growth was also weaker than expected, increasing 7.6% in July from a year earlier, compared with 9.8% in June. Analysts surveyed by Reuters had expected growth of 8.6%.
But investment readings by sector showed a more marked loss of momentum in key sectors at the start of the third quarter.
Property investment grew 10.6% in the first seven months of the 2019 on-year, slowing from 10.9% in Jan-June. The sector has been one of the few bright spots in China’s economy.
China’s economy has been slow to respond to a flurry of support measures rolled out since last year, with growth cooling to a near 30-year low in the second quarter. Business confidence also remains shaky, weighing on investment.
Investors fear a longer and costlier trade war between the world’s two largest economies could trigger a global recession.
Already, the tariff row has hit world trade, investment and corporate profits. It is also pushing some Chinese manufacturers to move capacity to neighbouring countries and rebuild supply chains outside of China.
China’s industry ministry said in late July that the country would need “arduous efforts” to achieve 2019’s industrial output growth target of 5.5% to 6.0%, citing trade protectionism pressures.
Analysts say Beijing will need to deliver more stimulus to prevent a deeper downturn and to help stabilise growth. That view was reinforced earlier this month when a brief ceasefire in the trade war was shattered after U.S President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports from Sept. 1.
Such a move would extend levies to effectively all of the goods China sells to the United States. But in an apparent effort to blunt their impact on U.S. holiday sales, Trump on Tuesday delayed duties on some Chinese imports including cellphones, laptops and other consumer goods to December.
Sources told Reuters recently that more aggressive action such as interest rate cuts are a last resort, as it could fuel a sharper build-up in debt.
Despite prodding from Beijing, several bankers have told Reuters they have little appetite to lend to smaller companies due to the uncertain economic outlook, the trade war and a years-long drive to purge risks from the financial system. Some firms also say banks are sharply reducing credit lines.