China industrial output drops again in August

China's economy revealed fresh signs of headwinds in August as data showed today that industrial output and retail sales unexpectedly slowed for a second consecutive month.

The readings follow disappointing export figures released last week, a one-two punch for the Asian giant, as an official pointed to weak overseas demand and warned the domestic economy still faces "many hidden concerns".

Output at factories and workshops expanded six percent last month, the lowest recorded this year and well below the 6.6 percent forecast in a Bloomberg News survey.

Retails sales slowed slightly to 10.1 percent while fixed asset investment increased 7.8 percent in the January-August period -- both well below expectations.
 

"In general, the national economy in August kept the momentum of steady increase," national statistics bureau spokeswoman Liu Aihua said at a news conference.

"But we should also see that there are still many instabilities and uncertainties in the international circumstance, and the domestic economy ... Still faces many hidden concerns."

The data comes as the government seeks to rein in huge debt and excess capacity left over from massive government- backed infrastructure spending at the height of the global financial crisis.

The Chinese economy enjoyed better-than-expected growth in the first two quarters of the year thanks to debt-fuelled investment in infrastructure and real estate, although warnings of a potential financial crisis have spurred Beijing to clamp down.

"The main culprit was a slowdown in infrastructure investment, which also weighed on industrial output," Julian Evans-Pritchard, China economist at Capital Economics, said in a research note.

"In particular, infrastructure spending has now begun to cool as the front-loading of fiscal spending this year ahead of the Party Congress means that local governments are now having to pair back their outlays," Evans-Pritchard wrote, referring to the twice-a-decade gathering of the ruling Communist Party in October at which President Xi Jinping is expected to be given a second term.

The long-term outlook remains clouded by geopolitical tensions linked to the North Korea nuclear crisis as well as US President Donald Trump's anti-globalisation rhetoric and threats to slap China with tariffs.