China slowdown worsens as August data miss forecasts, real estate slump deepens

China’s economic slowdown sharpened in August as retail sales, industrial output and investment figures fell short of expectations, with the country’s prolonged property crisis dragging heavily on growth.

Retail sales rose just 3.4% from a year earlier, below the 3.9% forecast in a Reuters poll and down from July’s 3.7%, data from the National Bureau of Statistics (NBS) showed Monday. Industrial output expanded 5.2%, easing from 5.7% in July and marking its weakest pace since August 2024, according to LSEG data.

Fixed-asset investment grew a meagre 0.5% in the January–August period, compared with 1.6% in the first seven months, far short of the 1.4% expected. Real estate investment plunged 12.9%, underscoring the depth of the sector’s downturn.

Manufacturing and utilities investment provided a partial cushion, rising 5.1% and 18.8% respectively, largely driven by state-owned enterprises. Private sector investment, however, contracted year-on-year. “Manufacturing growth remains modest and uneven,” said Yuhan Zhang of The Conference Board, noting that gains are mostly policy-driven in infrastructure, high-tech and industrial upgrades.

The urban jobless rate edged up to 5.3% from 5.2% in July, which the NBS linked to graduation season. The bureau warned that the economy still faces “multiple risks and challenges” from both domestic weakness and external uncertainties.

Consumption showed a mixed picture: rural sales climbed 4.6%, outpacing urban centres. Categories such as gold and jewellery (+16.8%), sports and entertainment goods (+16.9%), and furniture (+18.6%) surged, while petroleum, tobacco, and alcohol lagged. Service spending in travel and leisure also gained traction.

Inflation pressures remained subdued, with consumer prices falling 0.4% and producer prices stuck in deflation for a third straight year. NBS spokesperson Fu Linghui said inflation trends remain volatile amid yuan weakness and global commodity pressures.

Goldman Sachs economist Lisheng Wang warned consumption could slow “more meaningfully” from September as subsidies fade, urging “incremental and targeted easing” ahead.

Still, markets shrugged off the weak numbers: the CSI 300 index rose nearly 1% after the release, with investors already bracing for softer third-quarter growth. “The slowdown is not a surprise,” said Zhiwei Zhang of Pinpoint Asset Management, adding Beijing may only consider a major stimulus if its 5% growth target is at risk.

...with additional reporting from CNBC