Chinese industrial production grows more than expected in August

Chinese industrial production rose past expectations in August as improving local demand and a continued stream of monetary support from the government helped spur some recovery in the sector.

Industrial production rose 4.5% in August from the prior year, data from the National Bureau of Statistics showed on Friday. The reading was higher than expectations for growth of 4%, and more than the 3.7% rise seen in July.

Production for the year to August rose marginally, as expected, to 3.9% from 3.8% in the prior month.

A bulk of August’s positive reading was driven by a low basis for comparison, given that China still had large parts of the country under COVID restrictions in 2022. But the stronger-than-expected reading also suggested some pick-up in activity after the country lifted all anti-COVID restrictions at the beginning of 2023.

China’s manufacturing sector is still struggling with slowing activity, particularly amid slowing overseas demand for Chinese goods. But a private survey released earlier this month showed that improving local demand was helping spur new business for manufacturers.

Other data also showed that Chinese consumption was recovering, with retail sales rising 4.6% in August, up much more than expectations of 3% and the prior month’s growth of 2.5%.

But year-to-date retail sales growth still weakened to 6.98% in August from 7.33% in July.

China’s unemployment rate improved slightly to 5.2% in August from 5.3% in the prior month.

But growth in fixed asset investment- which represents capital spending by big businesses- slowed to 3.2% in August from 3.4% in July, reflecting continued caution over China’s economic prospects. While Friday’s data showed some improvement in the world’s second-largest economy, business activity in the country still remains well below pre-COVID levels.

Growth in China’s gross domestic product also fell sharply in the second quarter, with the economy barely expanding amid sluggish manufacturing and relatively subdued local demand.