Factory output in China grew 5.7% year-on-year in July, down from 6.8% in June and the slowest pace in eight months, according to data from the National Bureau of Statistics (NBS) published on Friday.
Retail sales rose 3.7% over the same period, also below expectations and the weakest reading since December 2024.
The data reflect broader concerns that policy support rolled out earlier in the year is losing momentum, as the world’s second-largest economy grapples with weak consumer confidence, a struggling property market and ongoing global trade tensions.
Fixed asset investment grew just 1.6% in the first seven months of 2025, compared to the same period last year. Analysts had forecast a 2.7% increase.
"The economy is quite reliant on government support, and the issue is those efforts were 'front-loaded' to the early months of 2025, and by now their impact has somewhat faded out," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
July also saw a contraction in new yuan loans, the first such decline in two decades, highlighting a reluctance among households and firms to borrow amid economic uncertainty.
China's government is targeting growth of around 5% for 2025. However, a Reuters poll published this week projected full-year GDP growth at just 4.6%—down from 5.0% in 2024—with further easing to 4.2% in 2026.
A prolonged downturn in the property sector, which has long served as a pillar of household wealth, continues to weigh on sentiment. New home prices fell 2.8% in July from a year earlier, following a 3.2% drop in June.
Lynn Song, chief economist for Greater China at ING, said in a note: "It’s difficult to expect consumers to spend with greater confidence if their biggest asset continues to decline in value every month."
Extreme weather, including floods and record-breaking heatwaves, has also disrupted production and consumption. Meanwhile, a temporary U.S.-China trade truce, extended this week by 90 days, has provided some relief, but analysts say underlying risks remain.
Chinese blue-chip shares rose 0.5% on Friday, while Hong Kong’s Hang Seng Index dropped 1.1% in afternoon trading.
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