China’s economy showing signs that slowdown may be extending

Industrial output and retail sales slump in July after one of the country’s weakest quarterly growth rates ever

China’s economy is showing signs of extending a slowdown with a slump in industrial output and retail sales in July, adding to pressure on Beijing to intervene with measures to support activity.

After the world’s second largest economy posted one of its lowest quarterly growth readings on record in the three months to June, the latest figures suggest it continued to falter in July.

Factory output grew 4.5% from a year earlier last month, compared with 5.3% in June, official figures from the National Bureau of Statistics (NBS) showed on Monday, missing a Reuters poll forecast for 4.8% growth.

Separate figures showed retail sales grew 0.6%, a slowdown from a 1% rise in June despite summer holiday tourism spending. Forecasters had predicted 1.5%.

The NBS said extreme weather, including high temperatures and heavy rainfall, had disrupted market supply and demand.

The latest snapshot, however is likely to increase pressure on policymakers to accelerate plans for tax and spending measures to support activity.

China’s premier, Li Qiang, suggested on Monday that efforts to bolster overseas demand for goods could be used to make up for weak domestic demand.

“Currently, the ⁠problem of insufficient ⁠domestic demand remains prominent, some industries and enterprises are facing increasing difficulties, and uncertainties in external environment are rising,” Li told ⁠a meeting of China’s state council, according to the state news agency, Xinhua.

“We should actively stabilise external demand, expand mutually beneficial international economic and trade cooperation and ⁠promote balanced trade development.”

Analysts say they expect stronger growth rates later this year, supported by spending measures from Beijing to increase activity.

“The silver lining is that the boost to manufacturing activity from AI capex [capital expenditure] continued to build, and that the wider weakness partly reflects temporary disruptions from recent typhoons,” said Julian Evans-Pritchard, the head of China economics at the consultancy Capital Economics .

“We still expect a modest uptick in growth over the rest of the year, supported by fiscal loosening.”

The latest snapshot comes after China posted a worse-than-expected annualised growth rate of 4.3% in the three months to June, one of its lowest quarterly readings on record.

The rate, which came in under the government’s target of 4.5% to 5%, was one of the weakest since Beijing began reporting official quarterly GDP data in the early 1990s.