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China data underscores weak domestic demand amid resilient production
Industrial production cooled to 4.5% year over year in July, while retail sales slowed to 0.6% and fixed-asset investment deepened to -6.7% y/y.
China’s July activity data highlighted a widening gap between steadier production and softer domestic demand, with multiple readings coming in below expectations, Action Forex said. Industrial production growth slowed to 4.5% year over year from 5.3%, missing the 4.8% consensus. Manufacturing continued to be a bright spot, particularly equipment manufacturing and high-tech manufacturing, which rose 9.7% and 13.8% y/y over the first seven months.
On the demand side, consumption disappointed more clearly. Retail sales growth decelerated to 0.6% y/y in July from 1.0%, far below expectations for 1.6%, and month to month sales rose only 0.06%. Retail sales of services were up 5.0%, but overall household spending remained too weak to drive convincing domestic growth.
Investment delivered the biggest downside surprise, reinforcing the imbalance. Fixed-asset investment deteriorated to -6.7% y/y year to date versus -6.0% expected, with real-estate development investment plunging -19.2% y/y and weakness extending into infrastructure (-3.6%), manufacturing investment (-1.7%), and private investment (-9.4%). Action Forex also noted that China’s statistics bureau acknowledged the imbalance between strong supply and weak demand remains acute, adding pressure on policymakers to support household spending and private-sector activity.