China’s economy lost momentum at the start of the second half of 2026, with industrial output and retail sales both missing forecasts in July, official data showed Monday. Retail sales grew just 0.6% from a year earlier while industrial production rose 4.5%, according to the National Bureau of Statistics, renewing pressure on policymakers to expand stimulus.
The figures extend a slowdown that began with second-quarter GDP growth of 4.3%, the weakest pace in roughly three and a half years and below Beijing’s 4.5%-5% target for 2026. They point to persistently weak domestic demand and a deepening property slump, even as exports continue to prop up the world’s second-largest economy.
Retail sales, the main gauge of consumer spending, rose 0.6% year-on-year in July, down from 1% growth in June and well short of a Reuters poll forecast of 1.5%. Industrial output grew 4.5%, slowing from 5.3% in June and undershooting forecasts that ranged from 4.8% to 5%, according to Reuters and Bloomberg surveys.
Fixed-asset investment contracted 6.7% over the January-July period, worse than an expected 6% decline and steeper than the 5.7% drop recorded in the first half of the year. The urban unemployment rate rose to 5.2% in July from 5% in June.
The Property Drag
New home prices fell 3.2% year-on-year in July and slipped 0.1% from June, extending a decline that has persisted for years. Roughly 52% of Chinese household wealth is tied to real estate, according to economist estimates, meaning falling prices continue to weigh on consumer confidence and spending.
What Officials and Analysts are Saying
Fu Linghui, an NBS spokesperson, told a press conference that authorities would “step up counter-cyclical policy adjustments” to support domestic demand, according to Reuters. Beijing has targeted growth of 4.5%-5% for 2026 but fell short of that range in the second quarter.
Xu Tianchen, senior economist at the Economist Intelligence Unit, said fiscal spending “has lagged behind” policy commitments, contributing to the weak data. Sheana Yue, senior economist at Oxford Economics, said accelerated fiscal execution following July’s Politburo meeting would likely support activity, and she is holding her full-year growth forecast at 4.8%.
The July data adds to evidence that China’s roughly 1.4 billion consumers remain reluctant to spend while the property sector stays mired in a multiyear slump. With domestic demand weak, the economy has leaned heavily on exports even as it faces headwinds from US tariffs and broader geopolitical tension. Economists say Beijing will need stronger fiscal support in the second half to hit its growth target for the year.
