China’s economy lost further steam in August, sharpening the debate over how much more support Beijing will need to hit its growth goal near 5 percent.
A broad monthly snapshot from the National Bureau of Statistics showed weaker momentum across output, spending and investment, alongside renewed price declines that point to soft domestic demand.
Industrial production rose 5.2% from a year earlier, the slowest pace since last summer. Retail sales increased 3.4%, easing from July, and the official manufacturing purchasing managers index stayed below the 50 boom-bust line at 49.4.
The surveyed urban jobless rate ticked up to 5.3%. Taken together, the figures suggest activity remains uneven and confidence fragile heading into the final quarter.
Price data underscored the demand challenge, and consumer prices fell 0.4 percent year on year in August, while producer prices dropped 2.9 percent, a narrower decline than in July but still consistent with ongoing disinflationary pressure.
Core CPI edged up 0.9 percent, a mild improvement that has yet to translate into a firmer spending impulse.
Deflation and housing drag persist
New home prices slid 0.3% from July and were down 2.5 percent from a year earlier, extending a long downturn despite earlier easing in mortgage rates and purchase rules in some big cities.
Property investment fell 12.9% in the January through August period. Sales also weakened on both a value and floor-area basis, indicating that buyers remain cautious and developers continue to face pressure.
Trade offered only a modest offset; in yuan terms, total goods trade rose 3.5% in August, with exports up 4.8 percent and imports up 1.7 percent.
That improvement helps at the margin, though it does not change the broader picture of tepid domestic demand and a private sector still nursing balance-sheet wounds from the property slump.
Credit conditions point to the same conclusion, and the central bank’s latest monthly report showed broad money (M2) up 8.8% from a year earlier in August, but loan growth and aggregate financing remain subdued by historical standards after an unusual contraction in new yuan lending in July.
August lending improved but stayed soft, reflecting weak appetite among households and companies. Policy makers have been cautious on headline rate moves.
The People’s Bank of China left its one-year and five-year loan prime rates unchanged on August 20 and relied on liquidity operations, including a 600 billion yuan one-year medium-term lending facility operation on August 25, to keep funding conditions easy.
These steps help cap borrowing costs, yet the August data strengthened the case for another round of targeted support if growth stays patchy.
Beijing is also leaning on fiscal and structural levers.
On June 24, authorities issued guidelines to channel more finance into consumption, particularly services, and on September 16 a group of ministries unveiled new measures to spur services spending, expand market access and backstop investment in travel, culture, sports and care sectors.
The push aims to stabilize demand in areas less exposed to the property cycle and external shocks.
The mix of softer growth, mild deflation, and restrained easing raises familiar questions about timing and scale for global investors.
More targeted credit support, quicker local-government bond issuance and further steps to steady housing could arrive if incoming data do not improve.
The risk is that policy arrives just as households and firms remain in repair mode, diluting the impact.
The opportunity is that a durable pickup in services and manufacturing upgrades lifts confidence enough to break the stop-go pattern that has defined China’s post-pandemic recovery so far, even as other geopolitical shifts threaten to shake global markets.
