China’s retail sales growth weakens further in August

China's retail sales growth weakened further in August, according to official data released on Tuesday, marking the second consecutive slowdown in spending since the end of the Covid-19 pandemic. Official figures showed a 0.4% year-on-year increase in August, the slowest pace since May. This figure fell short of the 0.8% growth predicted by a survey of economists and was better than the 0.6% contraction seen in May.

Beijing has been grappling with sluggish domestic spending since the pandemic began, as stagnant activity has weighed on national growth despite booming exports. Industrial production expanded by 5.2% in August, exceeding July's 4.5% growth and Bloomberg's forecast of 4.8%. Beijing acknowledged that adverse external factors are intensifying the domestic imbalance between strong supply and weak demand.

Authorities are targeting an economic growth rate of between 4.5% and 5.0% this year, the lowest goal in decades. However, fixed-asset investment contracted sharply by 7.2% year-on-year in August, more than initially expected. The economy continues to exhibit diverging signals, with consumption and investment remaining weak while industrial production maintains momentum.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that the economy faces downside risks in the third quarter as fiscal support takes time to be implemented and transmitted to the economy.