China’s economy cools again as industry, retail, investment slow

The pace of China’s economic expansion unexpectedly cooled further last month after a lackluster July, as factory output, investment and retail sales all slowed.

Key Points
Industrial output rose 6.0 per cent from a year earlier in August, versus a median projection of 6.6 per cent and July’s 6.4 per cent. That’s the slowest pace this year

Retail sales expanded 10.1 per cent from a year earlier, versus a projection of 10.5 per cent and 10.4 per cent in July, also the slowest reading in 2017

Fixed-asset investment in urban areas rose 7.8 per cent in the first eight months of the year over the same period in 2016, compared with a forecast 8.2 per cent rise. That’s the slowest since 1999

Big Picture
The continued cooling of the world’s second-largest economy suggests that efforts to rein in credit expansion and reduce excess capacity are hitting home ahead of the key 19th Party Congress in October. Still, producer-price inflation and a manufacturing sentiment gauge both exceeded estimates earlier this month, signaling some resilience.

The Shanghai Composite Index pared gains, as did the Australian dollar.

Economist Takeaways
“Today’s data shows that the economy clearly already peaked in the first half of this year,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “Recently both property and exports are slowing down and that’s why the whole economy is slowing.”

“Regulatory tightening in the financial sector is putting a squeeze on highly indebted firms reliant on shadow bank financing,” said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. “And officials are unlikely to take their foot off the regulatory brakes any time soon. Growth therefore looks set to weaken further into year end, as regulators step up their campaign to rein in shadow banking.”

The Details
Output of cement, coking coal fell by 3.7 per cent and 5.3 per cent respectively

Production of new-energy vehicles rose by 56.4 per cent in August after climbing 48.6 per cent in July

Leave a Reply