by Kevin Yao and Joe Cash

PEKIN (Reuters) -Industrial production and retail sales in China have recorded their weakest growth in August since last year, now pressure on Beijing to set up more recovery measures in order to avoid a brutal slowdown in the second world economy.

According to data published Monday by the National Statistics Office, industrial production in China increased by 5.2% in August, while a consensus compiled by Reuters tabbed on 5.7%. This is the lowest monthly growth since August 2024. In July, Chinese industrial production recorded growth of 5.7%.

Retail sales, a guarantee of consumption indicator, increased by 3.4% in August, while forecasts awaited them to 3.9%. This is the lowest growth since November 2024. In July, Chinese retail sales recorded growth of 3.7%.

The unemployment rate also increased slightly to reach 5.3% in August, its highest level for six months, compared to 5.2% in July and 5.0% in June.

These disappointing data in August divide economists as to whether politicians should resort to more short -term budgetary support to achieve their annual growth target of “around 5%”.

“The solid beginning of the year allows you to keep the growth objectives of this year at hand, but as at the same time last year, additional support support may be necessary to ensure a solid end of the year,” said Lynn Song, chief economist for Greater China at ING.

“Although it is too early to assess the impact of consumer loans that will come into force in September, it is likely that an additional political support is still necessary, given the general slowdown. We continue to think that it is very likely that a new drop in rates of 10 basis and a decrease in the RRR (Ratio Risk-Reward) of 50 bases take place in the coming weeks,” she added.

Investments in fixed active ingredients have also increased at a slower than expected rate, from 0.5% in the first eight months in annual sliding, compared to 1.6% from January to July. This is the worst performance, excluding pandemic.

The authorities rely on manufacturers to find new markets in order to compensate for the unpredictable commercial policy of US President Donald Trump and the weakness of consumer spending.

Separate data have shown this month that factories have managed to divert shipments for the United States to Southeast Asia, Africa and Latin America, but the weight of the real estate crisis continues to offset the efforts to stabilize the economy.

Zhaopng Xing, the main strategist for China at Anz, said that if the data showed a weakening of the dynamics of the second world economy, the situation was not yet serious enough to trigger a new series of recovery measures.

Damage at the end of the year

“We expected retail sales growth above 4% before September thanks to consumer subsidies, and what happened during these months is therefore disappointing,” Xu Tianchen, principal economist at the Economist Intelligence Unit.

Xu Tianchen said that the main economic indicators in China could deteriorate during the fourth quarter due to basic effects. Authorities are used to using additional political support towards the end of the year to ensure that the economy achieves the growth objective.

“This will increase the probability of a revival in the fourth quarter, in particular through monetary relaxation, an anticipation of debt emissions on this year and, possibly, a budgetary expansion,” he added.

Zheng Shanjie, head of the Chinese state planner, said last week that Beijing would fully use tax and monetary policies and improve his panoply of tools to achieve annual objectives.

The weather conditions did not help either, the manufacturing activity having been affected by the highest temperatures recorded since 1961 and the longest rainy season for the same period.

“But there are also more fundamental winds, in particular the weakening of tax support and efforts to reduce overcapacity,” said Zichun Huang, a specialist economist in China at Capital Economics.

“Although the weakness of the data can trigger a new softening of the policy in the coming months, it is likely that this is not enough to straighten the situation,” she added.

(Report by Kevin Yao, Joe Cash, with Yukun Zhang; Coralie Lamarque; edited by Augustin Turpin)

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