China’s economy lost further momentum in July as retail sales barely expanded, industrial output cooled and fixed-asset investment fell more sharply, underscoring persistent weakness in the world’s second-largest economy at the start of the second half.
Retail sales rose 0.6% year on year, missing the 1.3% median forecast in a Wind survey of economists and slowing from June’s 1% pace. The figure marks one of the weakest consumption readings in months and points to continued caution among households.
Industrial output climbed 4.5% from a year earlier, below the 4.9% projected by analysts and down from 5.3% in June. Fixed-asset investment, a closely watched gauge of construction and manufacturing activity, extended its decline as a prolonged property downturn continued to weigh on the broader economy.
The data reinforces concerns about a deepening supply-demand imbalance, in which factory output has outpaced domestic consumption. That gap has fueled deflationary pressure, squeezed corporate margins and left policymakers searching for ways to revive household spending.
The slowdown mirrors patterns seen during earlier phases of the recovery, when uneven consumption and a weak property sector complicated efforts to sustain growth. China’s economic picture has swung between periods of acceleration and renewed softness, as an earlier pickup in activity struggled to translate into durable momentum.
Beijing has set an annual growth target of around 5% for 2026, a goal that will require stronger domestic demand in the coming months. Officials have rolled out consumer trade-in subsidies and measures aimed at stabilising the housing market, though the effect on headline spending has so far proven limited.
The July figures also feed into a wider debate among economists over whether persistent imbalances in China’s economy could pose risks to global markets. Weak domestic demand has pushed manufacturers to seek export outlets, intensifying trade frictions with major partners.
Analysts suggest additional stimulus may be needed to prevent further cooling, with attention now turning to whether policymakers will loosen monetary policy or expand fiscal support in the second half.
The next major test will come with third-quarter growth data and any policy signals emerging from upcoming government meetings, which markets will scrutinise for clarity on Beijing’s next steps.