China's shoppers stayed cautious. Retail sales crept up 0.4% in August from a year earlier, softer than July's 0.6% and below the 0.8% economists forecast in Bloomberg's survey. The biggest weight was autos, with vehicle sales tumbling 18.5% from a year ago. Strip out cars and sales grew 2.5% in August, matching July's pace.
Confidence took a knock as the surveyed urban jobless rate inched higher, rising to 5.3% after 5.2% in July. The end of car purchase subsidies, a shakier jobs backdrop, and declining property values are all pressuring wallets. For monthly reporting, the statistics bureau combines the first two months of the year into a single reading.
Factories told a different story. Industrial output rose 5.2% in August from a year earlier, up from 4.5% in July, powered by double digit growth in exports. Global spending running into the hundreds of billions of dollars to build data centers is funneling demand to China, lifting shipments of AI related goods such as integrated circuits.
Manufacturers' average profit margin came in at 4.9% in July. That is better than a year earlier, but still below the 6.7% seen in 2021. Investment tied to the government's Six Networks push was a rare bright spot: capital spending on information transmission jumped 28.4% in the January to August period, compared with 26% through the first seven months.
Outlays for waterway transportation rose 14.7% over the first eight months, versus 16.2% in data through July. The program spans projects like data centers, power grids, ultra high speed fiber broadband and waterways.
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Broad investment slowed. Over the first eight months, fixed-asset investment declined 7.2% compared with a year earlier. Property remained a drag, with real estate investment down 19.9% over the same period. A revamp aimed at phasing out the pre sale model would delay developers' access to mortgage funds to better protect buyers, likely curbing builders' expansion as the sector wrestles with a long running cash squeeze.
Beijing is leaning more on fiscal policy, but reversing the drop in government outlays and pushing money into the real economy could take time. Miao Yanliang at China International Capital Corp. said it is time to roll out all the fiscal measures pledged at the Two Sessions earlier this year. He noted that government bonds planned for issuance during the remainder of this year but not yet sold exceed last year's level by 1.5 trillion yuan, which he estimated is about 1.1% of GDP, adding that spending financed by those bonds should be enough to meet the growth target.
Barclays, Oxford Economics and Macquarie Group see third quarter GDP up 4.3% from a year earlier based on July and August readings. Goldman Sachs Group Inc. cut its estimate for the quarter to 4.4% from 4.6% after the data. Australia & New Zealand Banking Group said growth was running at 4.2% over July and August, which is below the pace needed in the second half to hit the full year goal. Without a clear rebound in September, growth risks slipping under the 4.5% to 5% official target range for a second straight quarter after the sharp slowdown in April to June.
Markets took the data in stride. The yuan was steady onshore and offshore and has outperformed most Asian peers over the past week even as the dollar firmed, helped by a stronger daily fixing from the People's Bank of China. The 10 year government bond yield was little changed at 1.68%. Oil's jump back above $100 a barrel amid Middle East tensions is squeezing downstream industries, adding another external headwind.
Officials sounded cautious. NBS spokesman Fu Linghui said "the economy was overall stable," but also highlighted threats stemming from overseas conflicts and a mismatch between robust supply and weaker demand. Bloomberg Economics' Chang Shu and Eric Zhu see late September as a key moment to reassess policy, with a higher chance of speeding up already budgeted spending rather than rolling out major new stimulus. Carlos Casanova at Union Bancaire Privee warned that "The risk is that policymakers become complacent and fail to introduce sufficient counter-cyclical measures to support domestic demand," which could "leave China trapped in a structural cycle of high savings, weak consumption and persistently low growth."
The through line for your wallet: factories are humming thanks to global AI demand, but that strength is not showing up in household incomes or property yet. If momentum does not broaden, pressure will build for more support at home, and that keeps the outlook uneven for sectors tied to China's consumer.
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