July econ data highlights need for economic stimulus

The July econ data out of China hinted at a slowdown in two of the brightest spots of the economy: Industrial activity and business investment.

Per data released by the stats bureau (NBS) on Thursday:

• Industrial value-added (IVA) grew by 5.1% y/y in July, down from 5.3% the previous month
• Fixed asset investment (FAI) grew by 1.9% y/y, down from 3.6% in June
• Retail sales of goods grew by 2.7% y/y, up from 2.0% in June
• Retail sales of services grew by ~5.4% y/y, down from 5.9% the previous month

In a nutshell: This is a bad print.

• Household consumption remains subdued, while the drop in IVA and FAI growth suggests other parts of the economy may also be beginning to slow.

Moreover, the property sector was still the biggest drag on the economy.

• Floor space under construction fell 21.7% y/y in July.
• The value of home sales fell 17.5% y/y.

The sector is unlikely to see any near-term rebound in construction activity.

• New starts fell 19.7% y/y in July.

What's more, a collapse in real estate investment was the main drag on FAI.

• Real estate investment fell 10.8% y/y, worse than June’s 10.1% drop.

Excluding real estate, we estimate FAI grew by 5.1% y/y.

• Still a bummer: Although this is an improvement on the headline figure, it is still the slowest growth rate this year, by a long shot.

Get smart: Industrial activity and business investment have been the main economic growth drivers so far this year.

• Last month’s slowdown in both metrics will concern policymakers.

Our question: Is the July econ data enough to convince Beijing that additional economic stimulus is needed?