China’s factory output grew at the lowest pace in nearly six years last month, while growth in other key sectors also cooled, raising fears the world’s second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
Industrial output rose 6.9 percent last month from a year earlier — the lowest since 2008 when the economy was buffeted by the global financial crisis — compared with expectations for 8.8 percent and slowing sharply from 9 percent in July.
“The August data may point to a hard landing. The extent of growth slowdown in the third quarter will not be small,” said Xu Gao (徐高), chief economist at Everbright Securities (光大證券) in Beijing. “The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates.”
Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government’s full-year growth target of around 7.5 percent in jeopardy unless it takes more aggressive policy measures.
“Short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms,” Liu Li-gang (劉利剛) and Zhou Hao (周浩) at ANZ wrote in a note.
“As such, we reckon that Chinese authorities should further relax monetary policy as soon as possible to prevent the growth momentum from decelerating further,” they wrote.
China’s economy got off to a weak start this year as first-quarter growth cooled to an 18-month low of 7.4 percent. A raft of stimulus measures pushed that up slightly to 7.5 percent in the second quarter, but soft July and August data suggest the boost from those steps is already quickly waning.
Retail sales climbed 11.9 percent last month, lagging forecasts of 12.1 percent and slowing from 12.2 percent in July.
Fixed-asset investment, an important driver of economic activity, grew 16.5 percent in the first eight months from the same period last year, lower than forecasts, data showed.
Much of the broader decline appears linked to the cooling property market, which is showing further signs of deterioration.
Property investment data also released on Saturday showed further declines in sales and new construction, while growth in housing-related goods such as home appliances, furniture and building materials all slowed.
Mortgage issuance in the first eight months fell 4.5 percent from a year earlier, worse than a 3.7 percent drop from January through July.
Some would-be buyers have complained of long delays in getting loans as banks grow more cautious about their exposure to the sector, while others may be holding off in anticipation of further price declines.
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