China’s Economy Cools Again as Industry, Retail, Investment Slow

Sep 20, 2017 4:47 pm ET

(Bloomberg) -- The pace of China’s economic expansion unexpectedly cooled further last month after a lackluster July, as factory output, investment and retail sales all slowed.

Key Points

  • Industrial output rose 6.0 percent from a year earlier in August, versus a median projection of 6.6 percent and July’s 6.4 percent. That’s the slowest pace this year
  • Retail sales expanded 10.1 percent from a year earlier, versus a projection of 10.5 percent and 10.4 percent in July, also the slowest reading in 2017
  • Fixed-asset investment in urban areas rose 7.8 percent in the first eight months of the year over the same period in 2016, compared with a forecast 8.2 percent rise. That’s the slowest since 1999

Big Picture

The continued cooling of the world’s second-largest economy suggests that efforts to rein in credit expansion and reduce excess capacity are hitting home ahead of the key 19th Party Congress in October. Still, producer-price inflation and a manufacturing sentiment gauge both exceeded estimates earlier this month, signaling some resilience.

The Shanghai Composite Index pared gains, as did the Australian dollar.

Economist Takeaways

"Today’s data shows that the economy clearly already peaked in the first half of this year," said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. "Recently both property and exports are slowing down and that’s why the whole economy is slowing."

"Regulatory tightening in the financial sector is putting a squeeze on highly indebted firms reliant on shadow bank financing," said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. "And officials are unlikely to take their foot off the regulatory brakes any time soon. Growth therefore looks set to weaken further into year end, as regulators step up their campaign to rein in shadow banking."

The Details

  • Output of cement, coking coal fell by 3.7 percent and 5.3 percent respectively
  • Production of new-energy vehicles rose by 56.4 percent in August after climbing 48.6 percent in July

--With assistance from Ailing Tan

©2017 Bloomberg L.P.