China's industrial output slows in July, retail sales miss forecasts

China's economy showed signs of strain in July, with industrial output growth decelerating and retail sales expanding less than anticipated. This slowdown underscores ongoing challenges related to weak domestic demand, disruptions from extreme weather, and the diminishing impact of government stimulus measures.

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Industrial output in July rose 4.5 per cent from a year earlier, slowing from 5.3 per cent growth in June, data released by the National Bureau of Statistics showed on Monday.

Industrial production rose 4.5% year-on-year in July, a decrease from the 5.3% growth recorded in June and below the 4.8% expected by analysts. Extreme weather events, including typhoons, likely hampered factory output, particularly in key manufacturing hubs along the eastern and southern coasts.

Retail sales saw a modest increase of 0.6% in July, down from 1% in June. This performance lagged behind forecasts of 1.5% growth, even with the contribution of summer holiday tourism. Efforts to boost consumer spending through trade-in subsidies appear to be losing momentum, with average daily sales from these programs declining in July compared to June.

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Retail sales grew 0.6 per cent, slowing from a 1 per cent rise in June despite summer holiday tourism spending.

Further evidence of economic sluggishness comes from fixed-asset investment, which contracted by 6.7% in the first seven months of the year. This follows a 5.7% contraction in the January-June period. The weak domestic demand poses a significant risk to the economy, leaving it vulnerable to external shocks such as weather disruptions and trade tensions. While exports remain robust, driven by global demand for AI infrastructure, they are insufficient to offset domestic weakness.

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Fixed-asset investment contracted 6.7 per cent in the first seven months of 2026, compared with an expected 6 per cent decline.