Economic activity disappoints in August

Latest reading: Industrial output expanded by 5.2% in August compared with a year earlier, moderating from July’s 5.7% and coming in below market forecasts. It was the weakest pace of growth since August 2024, as momentum in manufacturing and utilities output cooled. Retail sales advanced 3.4% in August from a year earlier, down from July’s 3.7% and below the anticipated 3.8%. This marked the weakest growth since November 2024, as the lift provided by the consumer trade-in initiative faded across multiple industries. In addition, fixed-asset investment rose by 0.5% year-on-year in January–August, much less than market expectations and compared to a 1.6% increase in the first seven months. Finally, housing indicators such as home prices, housing sales and floor space under construction remained in contraction, showing that the property sector has yet to turn a corner despite repeated government support measures.

Panelist insight: On the implications of the data, Nomura analysts said: “The activity data […] are broadly in line with our forecasts for demand shocks in H2 and limited support to the real economy from the ongoing stock rally. While we see some upside risk to our cautious Q3 GDP growth forecast of 4.0% (versus the official reading of 5.2% for Q2), due to the faster growth in the financial sector, we believe consensus GDP forecasts may need to be revised down following today’s release.”

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