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China's factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the cooling housing market increasingly drags on other sectors from cement to steel and saps consumer confidence.
Industrial output rose 6.9 per cent in August from a year earlier — the lowest since 2008 when the economy was buffeted by the global financial crisis — compared with expectations for 8.8 per cent and slowing sharply from 9.0 per cent in July.
"The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won't be small," said Xu Gao, chief economist at Everbright Securities in Beijing.
"The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates."
Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government's full-year target of around 7.5 percent in jeopardy unless it takes more aggressive action. Experts reckon output growth of around 9 percent would be needed to attain such a goal.
"Short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms," Liu Li-Gang and Zhou Hao at ANZ wrote in a note.
"As such, we reckon that Chinese authorities should further relax monetary policy as soon as possible to prevent growth momentum from decelerating further."
Reinforcing the tepid economic activity, China's power generation declined for the first time in four years, falling 2.2 percent in August from a year earlier, and pointing to slackening demand from major industrial users.
Jiang Yuan, a senior statistician with the bureau, said the dip in August factory growth was due to weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement and vehicles.
China's economy got off to a weak start this year as first-quarter growth cooled to an 18-month low of 7.4 percent. Beijing responded with a flurry of stimulus measures that pushed the pace up slightly to 7.5 percent in the second quarter, but soft July and August data suggest the boost from those steps is rapidly waning.
"The government must take forceful policy measures to stabilize growth," said Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai.
