(Reuters) – Goldman Sachs and Citigroup cut their forecast for China’s gross domestic product (GDP) growth in 2024 to 4.7% after industrial output in the world’s second-largest economy hit a five-month low in August.

The weakness in economic activity last month underscores the slow pace of the Asian giant’s economic recovery and the need for further stimulus to support demand.

The slowdown in growth has led the two brokers to revise downwards their projections for 2024, below the target of “around 5%” set by the Chinese government.

Goldman Sachs had previously forecast full-year growth of 4.9%, while Citigroup had forecast growth of 4.8%.

China’s industrial output rose 4.5 percent year-on-year in August, slowing from 5.1 percent in July and the weakest growth since March, data from the National Bureau of Statistics (NBS) showed Saturday.

Retail sales – a key indicator of consumption – rose 2.1% in August, also slowing from a 2.7% increase in July, driven by extreme weather and a spike in summer travel.

Analysts had expected retail sales, which have been weak all year, to rise 2.5%.

“We believe the risk that China will miss its full-year GDP growth target of around 5% is increasing, and the urgency for further demand-easing measures is also increasing,” Goldman Sachs said in a note dated September 15.

The broker, however, maintained the country’s GDP growth forecast for 2025 at 4.3%.

For its part, Citigroup chose to lower its forecast for Chinese GDP growth in 2025 from 4.5% to 4.2%, citing the absence of major catalysts for domestic demand.

“We believe fiscal policy needs to be stepped up to escape the austerity trap and deliver timely support for growth,” Citigroup analysts say.

(Written by Kanchana Chakravarty in Bangalore; Diana Mandiá, edited by Blandine Hénault)

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