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China Retail Sales, Investment Miss Estimates as Jobless Rate Climbs
(MENAFN) Weakening domestic demand across China's economy — visible in cooling retail sales, a steep drop in fixed-asset investment and a rising jobless rate — is intensifying pressure on Beijing to roll out fresh fiscal and monetary support.
Retail sales rose just 0.4% year-on-year in August, missing forecasts and slipping from July's pace. Fixed-asset investment fell even harder, down 7.2%, a steeper decline than economists had projected. The unemployment rate climbed to 5.3%, also above expectations, even as industrial production held up relatively well, gaining 5.2%.
The combined drag from soft consumption and weak investment threatens to complicate Beijing's path toward its official growth targets.
Lynn Song, chief China economist at ING Group, wrote in a recent ING Think analysis that anemic domestic demand continues to hold back both spending and investment. He now expects GDP growth to essentially flatline in the third quarter, and said the current 4.6% growth forecast for 2026 may need to be revised lower.
According to Song, the bright spots in industrial output are being driven largely by demand from abroad, with China's tech and industrial sectors continuing to prop up broader growth even as most other areas lag.
“Auto sales were the biggest drag on retail sales, down 18.5% YoY,” he said. “Despite strong exports, China has been both the largest producer and the largest consumer of electric vehicles, and the drop in domestic demand has weighed on the auto sector this year.”
Furniture sales also slumped, down 7.9%, though household appliances bucked the trend — posting their first annual gain since September 2025, up 2.3%. Gold and jewelry sales, meanwhile, tumbled 17.5% year-on-year, hitting a four-month low despite gold prices rebounding in August.
Song pointed to recent stimulus efforts, including interest rate subsidies on consumer loans, but said their overall effect on consumption growth is likely to be limited.
“Moving forward, as the drag from the trade-in policy weakens, we may see some stabilization in retail sales, but a more significant turnaround will likely require additional support,” he added.
Retail sales rose just 0.4% year-on-year in August, missing forecasts and slipping from July's pace. Fixed-asset investment fell even harder, down 7.2%, a steeper decline than economists had projected. The unemployment rate climbed to 5.3%, also above expectations, even as industrial production held up relatively well, gaining 5.2%.
The combined drag from soft consumption and weak investment threatens to complicate Beijing's path toward its official growth targets.
Lynn Song, chief China economist at ING Group, wrote in a recent ING Think analysis that anemic domestic demand continues to hold back both spending and investment. He now expects GDP growth to essentially flatline in the third quarter, and said the current 4.6% growth forecast for 2026 may need to be revised lower.
According to Song, the bright spots in industrial output are being driven largely by demand from abroad, with China's tech and industrial sectors continuing to prop up broader growth even as most other areas lag.
“Auto sales were the biggest drag on retail sales, down 18.5% YoY,” he said. “Despite strong exports, China has been both the largest producer and the largest consumer of electric vehicles, and the drop in domestic demand has weighed on the auto sector this year.”
Furniture sales also slumped, down 7.9%, though household appliances bucked the trend — posting their first annual gain since September 2025, up 2.3%. Gold and jewelry sales, meanwhile, tumbled 17.5% year-on-year, hitting a four-month low despite gold prices rebounding in August.
Song pointed to recent stimulus efforts, including interest rate subsidies on consumer loans, but said their overall effect on consumption growth is likely to be limited.
“Moving forward, as the drag from the trade-in policy weakens, we may see some stabilization in retail sales, but a more significant turnaround will likely require additional support,” he added.
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