China’s factory output beats forecasts as retail sales weaken

China's industrial output accelerated in August while retail sales and investment continued to weaken, underscoring a deepening imbalance in the world's second-largest economy that is raising pressure on Beijing to deliver fresh stimulus.

Industrial output grew 5.2% from a year earlier in August, quickening from a 4.5% increase in July and beating expectations for a 4.8% rise, according to data released Tuesday by the National Bureau of Statistics. Retail sales rose just 0.4%, slowing from a 0.6% gain in July and falling well short of the 0.8% increase analysts had forecast. Fixed-asset investment declined 7.2% in the first eight months of the year, the steepest drop since April 2020.investing+2

Property Drag, Tech Bright Spot

The property sector remained the most visible weight on the economy. Real estate investment plunged 19.9% in the January-to-August period, and new home prices extended their month-on-month decline, though the annual pace of price falls narrowed slightly to 3.0% from 3.2%. Investment in high-tech industries expanded 5.2% over the same period, buoyed by the global AI boom, with output of lithium-ion batteries and industrial robots soaring 57.2% and 34.6% year-on-year respectively.investinglive+1

The urban surveyed unemployment rate edged up to 5.3% in August from 5.2% in July. Four typhoons made landfall during the month, disrupting manufacturing and logistics along the east coast.reuters+1

Stimulus Expectations Build

The data barely moved Chinese markets, with key stock benchmarks slipping roughly 0.3% and the yuan weakening slightly against the dollar. Oxford Economics lowered its 2026 growth forecast by 0.1 percentage point to 4.7% and cut its 2027 projection to 4.3%, "reflecting a more prolonged property downturn which is likely to keep growth subdued despite stronger public investment," senior economist Sheana Yue said.marketscreener+1

Beijing has responded with faster government bond issuance and expanded loan interest subsidies for small firms and consumers, but the central bank has stopped short of signalling explicit rate cuts or reductions to banks' reserve-requirement ratio. "Policymakers' reluctance to deploy a more forceful consumption-focused stimulus is likely to prolong the adjustment process," analysts at Barclays ↘ 3.15% wrote in a note.reuters+1

With the economy having slowed to 4.3% growth in the second quarter — below the lower end of Beijing's 4.5%-to-5.0% annual target — analysts are watching September as a potential policy window ahead of October's Golden Week holidays.investinglive+1