According to a range of indicators, China has seen a slowdown of economic activity in July, suggesting that the country’s economy could be running out of steam. Data released on Friday showed that July’s industrial production output stood at six percent higher than a year before, down from June’s 6.2 percent year-on-year growth.
China also saw fixed asset investment such as in buildings or factories in non-rural areas grow by only 8.1 percent between January and July – the slowest rate of growth in 17 years. In particular, fixed asset investment from private firms declined sharply. This means that state firms now heavily dominate fixed asset investment in China. Real estate investment has also markedly slowed.
July’s industrial production output stood at six percent higher than a year before, down from June’s 6.2 percent year-on-year growth
Earlier released data from the Caixin PMI for China also showed that the country’s service sector output slipped in July, with its measure falling from 52.7 in June down to 51.7 in July. At this level, the country’s service sector is still expanding – anything over 50 is an expansion in the PMI gauge – but the new figure shows a marked slowdown.
One area that has seen strong growth in China is the car industry. July saw car sales rise at the fastest monthly rate in over three years. As Reuters reported: “Auto sales grew 23 percent year-on-year to 1.9 million vehicles in July from a year earlier, the highest monthly growth since January 2013, the China Association of Automobile Manufacturers said on Friday.”
However, much of the growth can be attributed to a recent government tax cut on small engine vehicles, as well as weak comparative growth in the prior year.
According to the Nikkei Asia Review, economists are predicting that China’s central bank will cut interest rates in response to the country’s slowing economy: “JP Morgan expects another 25 basis points as soon as October.”