China’s industrial growth slowed to new 17-year low in August, even before new US trade war tariffs took effect
- Industrial production, which measures industrial output grew at 4.4 per cent last month, down from 4.8 per cent in July and the lowest growth since February 2002
- Retail sales, a key metric of consumption in the world’s most populous nation, grew by 7.5 per cent, below analysts’ forecasts
China’s industrial engine continued to stutter in August, with a key gauge of the country’s manufacturing growth slumping to a new 17-year low, in the last month before the United States imposed new tariffs on Chinese-made goods.
Industrial production, which measures China’s industrial output, including manufacturing, mining and utilities, grew at 4.4 per cent last month, down from 4.8 per cent in July, which in itself was the lowest rate since February 2002. This was well below a poll of analysts taken by Bloomberg that had expected growth of 5.2 per cent.
A batch of data released by the National Bureau of Statistics (NBS) on Monday also showed that retail sales, a key metric of consumption in the world’s most populous nation, grew by 7.5 per cent, also below analysts’ forecasts of 7.9 per cent expansion. This was a slight decline on July’s 7.6 per cent growth and the lowest figure since April.
Fixed asset investment, the level of spend on physical assets, including real estate and infrastructure, grew by 5.5 per cent in the first eight months of 2019. This was down from 5.7 per cent in July, and – again – below analysts’ expectations. The Bloomberg poll had forecast no change. This was the lowest growth in fixed asset investment since August 2018, when it was 5.3 per cent.
Within industrial production, the NBS figures showed slumps in both manufacturing and mining. Manufacturing grew by 4.3 per cent in August, down from 4.4 per cent in July and 5.2 per cent in June. Mining output, meanwhile, grew by 3.7 per cent last month, down from 6.6 per cent last month.
Fixed asset investment growth for the year-to-date had been flat, but in August it declined, despite the government’s efforts to funnel money towards infrastructure projects in a bid to boost the economy. Many analysts have pointed out that the major impact of the trade war on both the economies of the US and China to date has been a chilling effect on investment, and August’s growth slump is likely to indicate just that.
“Fixed investment expanded at a weaker-than-expected [rate]”, said Martin Lynge Rasmussen, China economist at Capital Economics. “This was the result of weakness in property construction and manufacturing overshadowing strong infrastructure spending.”
Yet, this has done little thus far to boost consumption. Retail sales have been on a downward trajectory for the last couple of years, a reflection of many of the issues in China’s debt-laden economy that predate the trade war.
Again, the uncertainty that the US-China dispute brings to the table is acting as a dampener on consumption, as can be seen in the unrelenting slump in China’s car market. Car sales in China fell by 6.9 per cent in August, marking the 14th successive monthly slump, with individuals and businesses appearing to be holding back on big ticket purchases while the geopolitical situation remains so volatile.
Talks will resume in October, when a Chinese delegation led by Vice-Premier Liu He travels to Washington. However, given that many of China’s economic issues predate the trade war, this sort of short-term deal may leave analysts to measure their expectations as to its impact on the economy.