China: July data keeps economic risks to the downside in 3Q – UOB Group

In Jul, China’s industrial production and retail sales were broadly in line with consensus forecasts, but fixed asset investment unexpectedly slowed as property investment contraction worsened, UOB Group economist Ho Woei Chen notes.

Uneven growth in Jul with weak retail sales

“China’s industrial production and retail sales were broadly in line with consensus forecasts, but fixed asset investment unexpectedly slowed, and the surveyed jobless rates jumped higher in Jul. The housing market remained in a downtrend with prices, residential property sales value and real estate investment continuing to fall.”

“Although loans demand tends to be seasonally weaker in Jul, the sub-par data has further heightened concerns over a balance sheet recession in China where monetary policy easing loses its effectiveness to boost demand due to the weak sentiment.”

“There is room for the LPRs to be further lowered next week (20 Aug) to reflect the larger than usual 20 bps cut to the 1Y MLF on 25 Jul. In the near-term, there is also the possibility of a 50 bps cut to the reserve requirement ratio (RRR). The weak data also calls for stronger fiscal measures to boost private consumption. With the overall picture remaining mixed, we expect China’s growth to moderate from 5.0% in 1H24 to 4.8% in 2H24 with full-year GDP growth likely at 4.9%.”