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China July industrial output growth falls to 17-year low

Reuters BEIJING (Reuters) — China reported a raft of unexpectedly weak July data on Wednesday, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the United States intensifies.

Industrial output grew 4.8 percent in July from a year earlier, data from the National Bureau of Statistics showed on Wednesday, lower than the most bearish forecast in a Reuters poll.

Analysts had forecast industrial output growth would slow to 5.8 percent, from June’s 6.3 percent growth, amid weakened demand at home and abroad. The United States had sharply raised tariffs on a large share of its Chinese imports in May.

Despite more than a year of growth boosting measures, Wednesday’s data showed China’s domestic demand remains sluggish, with gloomy July factory surveys, stubbornly soft imports and weaker-than-expected bank lending data released in recent days reinforcing views that Beijing needs roll out more stimulus soon to support the economy.

Retail sales growth was also weaker than the most pessimistic forecast, after a jump in July that many analysts had predicted would be temporary.

Retail sales rose 7.6 percent in July from a year earlier, compared with 9.8 percent in June and analysts’ expectations of 8.6 percent.

Fixed-asset investment rose 5.7 percent in January-July from the same period last year, lagging expectations of a 5.8 percent gain, the same as Jan-June.

But investment readings by sector showed a more marked loss of momentum in key sectors at the start of the third quarter.

Private sector fixed-asset investment, which accounts for about 60 percent of the country’s total investment, grew 5.4 percent in January-July, compared with a 5.7 percent rise in the first sixth months of 2019.

Property investment grew 10.6 percent in the first seven months of the 2019 on-year, slowing from 10.9 percent in Jan-June. The sector has been one of the few bright spots in China’s economy.

China’s economy has been slow to respond to a flurry of support measures rolled out since last year, with growth cooling to a near 30-year low in the second quarter. Business confidence also remains shaky, weighing on investment.

Investors fear a longer and costlier trade war between the world’s two largest economies could trigger a global recession.

Already, the tariff row has hit world trade, investment and corporate profits. It is also pushing some Chinese manufacturers to move capacity to neighboring countries and rebuild supply chains outside of China.

China’s industry ministry said in late July that the country would need “arduous efforts” to achieve 2019’s industrial output growth target of 5.5 percent to 6 percent, citing trade protectionism pressures.

Analysts say Beijing will need to deliver more stimulus to prevent a deeper downturn and to help stabilize growth.

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