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Analyst
Weak July Data; Investment Drop Broadens Beyond Property
Industrial production growth slowed to 4.5% yoy (-0.8ppt mom) in July, missing Bloomberg's consensus estimate of 5.0% yoy, despite continued strength in high-tech manufacturing industry. FAI ytd growth fell further to -6.7% yoy (-1.0ppt mom), below consensus estimates of -6.2% yoy, dragged by property FAI ytd (-19.2% yoy), with infrastructure and manufacturing FAI also now contracting.
Retail sales growth slowed to 0.6% yoy, down from June's 1.0% yoy and missing consensus forecasts of 1.5% yoy. The unemployment rate edged up to 5.2% (+0.2ppt mom).
July's data was weak across all major indicators, with the investment contraction broadening beyond property.
What’s New
Industrial production growth slowed to 4.5% yoy in July (-0.8ppt mom), below Bloomberg's consensus estimate of 5.0% yoy. In July, 25 of 41 major industries maintained yoy growth in output value (vs 29 in June), with manufacturing IP slowing slightly to 5.5% yoy despite high-tech manufacturing industry IP growth held up at 16.9% yoy (vs 13.8% ytd in June). The gains again came from a narrow set of new quality productive forces: Computer, communication and other electronic equipment (+19.1% yoy), railway and shipbuilding (+13.6% yoy), special equipment (+12.6% yoy) and general equipment (+9.5% yoy) led, while electrical machinery slowed to +5.3% yoy. On the other hand, mining output contracted 4.2% yoy after a 2.2% decline in June.
July's retail sales growth slowed to 0.6% yoy, down from June's 1.0% yoy and below Bloomberg's consensus estimate of 1.5% yoy. By consumption type, catering revenue grew 1.4% yoy (+0.2ppt mom) while retail sales of goods rose only 0.5% yoy (-0.4ppt mom). Policy-supported durable-goods categories remained the key drag, with automobiles down 17.0% yoy, building and decoration materials down 14.2% yoy, furniture down 8.8% yoy and petroleum products down 7.6% yoy; communication equipment (+20.4% yoy), cosmetics (+6.8% yoy), tobacco and alcohol (+6.0% yoy) and food (+5.3% yoy) were the main positives. June's rebound therefore appears to be temporary rather than the start of a sustained recovery.
FAI ytd growth fell further to -6.7% yoy in July (-1.0ppt mom), below Bloomberg's consensus estimate of -6.2% yoy. Property FAI ytd deepened to -19.2% yoy (-1.2ppt mom), missing consensus estimates of -18.9% yoy and hitting fresh multi-year lows. Notably, the weakness has broadened beyond property: infrastructure and manufacturing FAI ytd contracted 3.6% yoy and 1.7% yoy respectively, respectively, deteriorating by 1.2ppt and 0.5ppt from June.
Weak July Data; Investment Drop Broadens Beyond Property
Industrial production growth slowed to 4.5% yoy (-0.8ppt mom) in July, missing Bloomberg's consensus estimate of 5.0% yoy, despite continued strength in high-tech manufacturing industry. FAI ytd growth fell further to -6.7% yoy (-1.0ppt mom), below consensus estimates of -6.2% yoy, dragged by property FAI ytd (-19.2% yoy), with infrastructure and manufacturing FAI also now contracting.
Retail sales growth slowed to 0.6% yoy, down from June's 1.0% yoy and missing consensus forecasts of 1.5% yoy. The unemployment rate edged up to 5.2% (+0.2ppt mom).
July's data was weak across all major indicators, with the investment contraction broadening beyond property.
What’s New
Industrial production growth slowed to 4.5% yoy in July (-0.8ppt mom), below Bloomberg's consensus estimate of 5.0% yoy. In July, 25 of 41 major industries maintained yoy growth in output value (vs 29 in June), with manufacturing IP slowing slightly to 5.5% yoy despite high-tech manufacturing industry IP growth held up at 16.9% yoy (vs 13.8% ytd in June). The gains again came from a narrow set of new quality productive forces: Computer, communication and other electronic equipment (+19.1% yoy), railway and shipbuilding (+13.6% yoy), special equipment (+12.6% yoy) and general equipment (+9.5% yoy) led, while electrical machinery slowed to +5.3% yoy. On the other hand, mining output contracted 4.2% yoy after a 2.2% decline in June.
July's retail sales growth slowed to 0.6% yoy, down from June's 1.0% yoy and below Bloomberg's consensus estimate of 1.5% yoy. By consumption type, catering revenue grew 1.4% yoy (+0.2ppt mom) while retail sales of goods rose only 0.5% yoy (-0.4ppt mom). Policy-supported durable-goods categories remained the key drag, with automobiles down 17.0% yoy, building and decoration materials down 14.2% yoy, furniture down 8.8% yoy and petroleum products down 7.6% yoy; communication equipment (+20.4% yoy), cosmetics (+6.8% yoy), tobacco and alcohol (+6.0% yoy) and food (+5.3% yoy) were the main positives. June's rebound therefore appears to be temporary rather than the start of a sustained recovery.
FAI ytd growth fell further to -6.7% yoy in July (-1.0ppt mom), below Bloomberg's consensus estimate of -6.2% yoy. Property FAI ytd deepened to -19.2% yoy (-1.2ppt mom), missing consensus estimates of -18.9% yoy and hitting fresh multi-year lows. Notably, the weakness has broadened beyond property: infrastructure and manufacturing FAI ytd contracted 3.6% yoy and 1.7% yoy respectively, respectively, deteriorating by 1.2ppt and 0.5ppt from June.
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