China’s July Economic Data Disappoints Amid Cooling Global Demand

China’s industrial production and retail sales for July fell short of market expectations, highlighting ongoing weaknesses in both domestic consumption and export demand, according to official data released Friday.

Industrial Production Slows
Industrial output grew 5.7% year-on-year in July, missing expectations of 6% and down from 6.8% in June. The slowdown reflects fading effects of early inventory pre-stocking ahead of U.S. tariffs and broader cooling in global demand.

The trend aligns with other indicators of weakening manufacturing activity. The July official manufacturing PMI remained in contraction territory for the fourth consecutive month, with both new export orders and domestic demand showing continued weakness.

Retail Sales and Investment Lag
Retail sales expanded 3.7% year-on-year, underperforming the 4.6% forecast and June’s 4.8% growth, signaling muted consumer spending despite government efforts to stimulate consumption.

Fixed asset investment, representing domestic capital expenditure, rose just 1.6% in July, sharply missing expectations of 2.7% growth, further emphasizing sluggish business activity.

Labor Market Shows Strain
The official unemployment rate edged up to 5.2%, above both estimates of 5.1% and June’s 5.0%, underscoring challenges in the labor market amid softer economic activity.

Policy Outlook
China continues to operate under substantial U.S. trade tariffs, though a recent 90-day extension of the trade truce avoided a potential escalation. Policymakers now face mounting pressure to support domestic demand, potentially through fiscal measures or targeted consumption incentives, as both business investment and consumer activity show signs of slowing.