China’s economic indicators generally weakened and fell short of expectations last month amid extreme weather, significant rainfall, and geopolitical tensions. Nevertheless, the economy remained stable, with new growth engines supporting a transition toward higher-quality development.
Industrial output grew by 4.5% in July compared to a year earlier, a slowdown from the 5.3% increase recorded in June, according to data released yesterday. Retail sales of consumer goods experienced a modest increase of 0.6%, down from 1% in June.
Fixed-asset investment, excluding rural households, declined by 6.7% from January to July, widening from a 5.7% decrease in the first half of the year. All three economic indicators came in below forecasts; analysts had predicted a 4.8% rise in industrial output, a 1.6% increase in retail sales, and a 5.9% decrease in fixed-asset investment.
Adverse weather conditions caused natural disasters that impacted economic activities but generally remained manageable without altering the overall growth trajectory, according to Fu Linghui, a spokesperson for the National Bureau of Statistics, during a press briefing held by the State Council.
The economy is expected to maintain a stable, innovation-driven, and high-quality growth path, supporting the government’s target of 4.5% to 5% annual growth. This outlook relies on expanding the role of new growth drivers, deepening reforms, opening up markets, and implementing more effective economic policies, Fu emphasized.
Regional weather events such as typhoons, heavy rains, and heatwaves affected offline consumer spending, particularly in certain areas. However, service consumption has shown relative resilience in recent years, consistently outpacing goods in terms of growth, as noted by Wang Guanhua, spokesperson for the National Bureau of Statistics and deputy director-general of the national economic statistics department.
Wen Bin, the chief economist at China Minsheng Bank, observed that summer spending surges have emerged, driven by increased expenditure on leisure, entertainment, and travel, contributing to growth in the service sector. Conversely, spending on goods like cars and household items has slowed, partly due to waning policy stimulants and shifting consumer preferences. Consumer spending remains constrained by limited household purchasing power and a cautious willingness to spend.
Despite a slowdown in industrial output growth, the contribution of emerging sectors related to high-tech and digital products has increased. Preliminary estimates show that these sectors accounted for roughly half of the growth in industrial production from January to July, up by about 3 percentage points compared to the first half, indicating their growing influence.
Industry outlooks are mixed but optimistic: positive factors from new growth sectors and supportive policies are expected to offset challenges like subdued domestic demand, slowing exports, and rising costs. Wu Chaoming, chief economist at CSC Financial Holding, projects annual industrial production growth of nearly 5.5%.
With a lower comparison base and less severe weather disruption, year-on-year industrial output growth is expected to rebound to around 4.8% this month. As exports potentially weaken, China’s proactive policies aimed at stimulating domestic demand are likely to act as a buffer, according to Wang Qing, chief macro analyst at Orient Jincheng Credit Rating.
Industrial production is projected to stay within the growth range of 4.5% to 5.5%, with high-tech industries likely to sustain double-digit expansion and remain a primary growth engine, Wang added.
Market attention has focused on the declining pace of investment growth. Fu emphasized that investment efforts should not be judged solely by growth rates but by their role in driving economic transformation, infrastructure development, and improving people’s livelihoods.
Looking ahead, authorities plan to align investments in physical assets with human capital development. They aim to leverage government investment to stimulate private sector spending, advance major strategic initiatives, accelerate high-standard projects, and increase investments in innovation and public welfare—creating favorable conditions for sustainable, high-quality economic development.