Economic activity disappoints in July

Latest reading: Industrial production grew 5.7% year on year in July (June: +6.8% yoy). July's result marked the worst reading since November 2024 and was below market expectations, with output curbed by high temperatures and heavy rains. Meanwhile, retail sales growth slowed to 3.7% year on year, down from 4.8% in June and also undershooting market expectations. Sales moderated across categories, suggesting a fading boost from the government’s trade-in program. In addition, fixed-asset investment grew 1.6% year-on-year in January–July 2025, falling short of the 2.7% increase expected by markets and slowing from the 2.8% pace recorded in the first half of the year. 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 investment and the July activity data more broadly, Nomura analysts said: “Investment in sectors with excess capacity appears to have contracted more sharply, underscoring the adverse impact of the anti-involution campaign on the economy, which is already feeling the pain of a worsening housing slump, payback from the front-loading of exports and durable goods sales, and the new austerity measures. The broad-based weakness in the July data increases the conviction in our call for a notable slowdown in H2.”

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