China's recovery sputters as consumption, output lose steam

Beijing, China's economy is experiencing a slowdown at the beginning of the second half of the year, with industrial output and retail sales both weakening. This is due to extreme weather disruptions and persistently weak domestic demand, which is putting pressure on policymakers to increase stimulus measures. The disappointing data follows slow growth in the second quarter, signaling that China continues to rely heavily on exports to offset sluggish consumption and investment.

Factory output rose 4.5% from a year earlier last month, but this was below expectations of 4.8% growth. The poor performance is partly attributed to the ineffective use of available policy measures. Fiscal spending has lagged behind, according to Xu Tianchen, a senior economist at the Economist Intelligence Unit. Investment, which has declined sharply, is also a concern for Beijing, as it fell 6.7% in the first seven months of the year and 5.7% in the January-June period.

The country's property sector remains stagnant, with new home prices dropping 3.2% from a year earlier in July. Retail sales grew only 0.6% in the month, slower than the 1% increase in June, despite summer holiday tourism spending. Analysts estimate that about 52% of household wealth is tied up in real estate, a share that has decreased as investors have moved toward gold and other assets.

Retail sales increased 0.6% in the month, slower than the 1% rise in June. Overall, policymakers are facing challenges on multiple fronts, including the weather, while maintaining the target for China's economy to grow between 4.5% and 5% this year.