BEIJING: China’s industrial output and retail sales grew at a faster-than-expected pace in August, but property investment slumped further and could drag on broader demand even as the recent flurry of support policies showed signs of stabilising the economy.
Industrial output, released on Friday by the National Bureau of Statistics (NBS), rose 4.5% in August from a year earlier, accelerating from the 3.7% pace seen in July and came above expectations for a 3.9% increase in a Reuters poll of analysts. The growth marked the quickest pace since April.
Retail sales, a gauge of consumption, also increased at a faster 4.6% pace in August aided by the summer travel season, and was the quickest growth since May. That compared with a 2.5% increase in July, and an expected 3% increase.
The upbeat data suggest that a flurry of recent measures including property support policies to shore up a faltering economic recovery are starting to bear fruit.
Reacting to the data, the Chinese yuan touched two-week high against dollar.
Yet, the recovery is far from sure-footed, analysts say.
“Despite signs of stabilisation in manufacturing and related investment, the deteriorating property investment will continue to pressure economic growth,” said Gary Ng, Natixis Asia Pacific senior economist.
Friday’s data followed better-than-expected bank lending figures, narrowing in the declines of exports and imports as well as easing deflationary pressure.
The country’s passenger vehicle sales also returned to growth in August from a year earlier, as deeper discounts and tax breaks for environmentally friendly and electric vehicles boosted consumer sentiment.
To sustain the recovery momentum, China’s central bank said on Thursday it would cut the amount of cash that banks must hold as reserves for the second time this year to boost liquidity. Earlier in the day, the bank also rolled over maturing medium-term policy loans to inject more liquidity into the financial system, while keeping the interest rate unchanged.
But analysts say more fiscal and monetary policy steps are needed as an ailing property sector, high youth unemployment, uncertainty around household consumption and rising Sino-U.S. tensions over trade, technology and geopolitics have raised the bar for a durable economic recovery in the near future.
Ng said confidence remains the root of most problems requiring larger “constructive policy and regulatory changes” to boost growth momentum.
The once mighty property sector still remains a drag on the $18 trillion economy, with the country’s largest private developer Country Garden the latest to stumble due to liquidity squeeze.
For August, property investment extended its fall, down 19.1% year-on-year from a 17.8% slump the previous month, according to Reuters calculations based on NBS data.
Moody’s on Thursday cut China’s crisis-hit property sector’s outlook to negative from stable, expecting contracted sales to fall by about 5% over the next six to 12 months.
Fixed asset investment expanded 3.2% in the first eight months of 2023 from the same period a year earlier, versus expectations for a 3.3% rise. It grew 3.4% in the first seven months.
An uncertain business climate meant companies remained wary about hiring, but the nationwide survey-based jobless rate improved a touch to 5.2% in August, slightly down from 5.3% in July.