China's Economy Slumps in August, Casts Doubt on Growth Target

• China's factory output and retail sales reported their weakest growth since last year in August, keeping pressure on Beijing to roll out more stimulus to fend off a sharp slowdown in the world's second-largest economy.
• The disappointing data split economists over whether policymakers would need more near-term fiscal support to hit their annual growth target of "around 5%," with manufacturers awaiting more clarity on a U.S. trade deal and domestic demand curbed by a wobbly job market and property crisis.
• Industrial output grew 5.2% year-on-year, National Bureau of Statistics data showed on Monday, the lowest reading since August 2024 and weaker than a 5.7% rise in July. Retail sales, a gauge of consumption, expanded 3.4% in August, the slowest pace since November 2024, and cooled from a 3.7% rise in the previous month. They missed a forecast gain of 3.9%.
• "The strong start to the year still keeps this year's growth targets within reach, but similar to where we were at this time last year, further stimulus support could be needed to ensure a strong finish to the year," said Lynn Song, chief economist, Greater China at ING.
• "While it is too early to gauge the impact of the consumer loan subsidies coming into effect in September, it is likely that more policy support is still needed, given the broader slowdown across the board. We continue to see a high possibility for another 10bp rate cut and 50bp RRR cut in the coming weeks."
• Authorities are leaning on manufacturers to find new markets to offset U.S. President Donald Trump’s unpredictable trade policy and weak consumer spending. However, a separate data this month showed factory owners have had some success diverting U.S.-bound shipments to Southeast Asia, Africa and Latin America, but the drag from the property crisis continues to offset efforts to steady the economy.
• Zhaopeng Xing, senior China strategist at ANZ, said that while the data showed momentum in the world's second-largest economy was weakening, it was not yet bad enough to trigger a new round of stimulus. "Policies and measures to support service consumption are expected to offset the impact of aggregate demand this month," he said, adding an official crackdown on firms aggressively cutting prices made domestic demand appear worse than it was.

(Source: Reuters)