China: Growth momentum remained weak in August

Real activity appears to have softened in August amid weak domestic demand. We maintain our 2024 growth forecast at 4.8%, but see some downside risks. We expect more RRR and policy rate cuts by year-end, faster fiscal spending under the current budget, Standard Chartered’s economists Hunter Chan and Shuang Ding note.

5% growth target looks increasingly challenging

“Growth momentum remained soft in July-August following a significant q/q slowdown in Q2. August industrial production (IP), retail sales and fixed asset investment (FAI) growth all fell short of expectations on subdued domestic demand and adverse weather. The unemployment rate rose further to 5.3% from 5.2% in July, partly due to college students graduating. Meanwhile, the 3Y CAGR (with 2021 as the base year) for most real activity indicators improved, balancing the generally negative picture.”

“Specifically, IP growth edged down to a five-month low of 4.5% y/y in August from 5.1% in July. Seasonally adjusted retail sales were about flat after a brief rebound in July. Services production index growth fell to a four-month low of 4.6% y/y. Private investment contracted for a second straight month, dragged down by the weak real estate sector. Infrastructure investment growth also slowed further. GDP growth remained below 5% y/y in August, according to our estimate.”

“We maintain our 2024 growth forecast at 4.8%, as we expect more policy support by year-end. We expect the government to focus on accelerating government bond issuance and fiscal spending to fully utilise the fiscal space under the approved budget. We also expect the People’s Bank of China (PBoC) to cut the reserve requirement ratio (RRR) by 25bps this month and lower the policy rate – i.e., the 7D reverse repo rate – by 10bps in Q4.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.