The factory output of China rose in August at its weakest pace in nearly six years while growth in other important sectors also performed badly, signalling harder times ahead.
The latest figures have grown fears that the world’s second-largest economy may be at risk of a sharp slowdown unless no immediate stimulus measures are taken by the government.
The output data along with weaker investment, imports and retail sales readings led to a further loss of momentum. Meanwhile, the cooling housing sector highly dragged on other sectors ranging from steel to cement and saps consumer confidence.
Xu Gao, chief economist at Everbright Securities in Beijing, said, “The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won’t be small. The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates.”
China’s industrial output increased 6.9 percent last month from a year earlier.
According to the financial analysts, the annual economic growth of the Asian country may be declining towards 7 percent in the third quarter. This is driving the full-year target of around 7.5 percent set by the Chinese government in peril unless Beijing takes more aggressive stimulus action to handle the crisis. The experts consider an output growth of around 9 percent to attain such a goal.
Writing for a note, Liu Li-Gang and Zhou Hao at ANZ, said, “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.”
The Chinese government should further ease the monetary policy with immediate action in order to prevent growth momentum from decelerating further,” they said.
The tepid economic activity also drove China’s power generation to decline in August for the first time in four years. It fell 2.2 percent last month from a year earlier pointing towards slackening demand from major industrial users.