China has encountered a decline in retail sales growth and an increase in the unemployment rate in August, which brings signs of reduced domestic demand. This situation has strengthened expectations for the need for additional fiscal and monetary measures from Beijing to support economic growth.
Decline in Retail Sales Growth and Investment
Retail sales in China grew by only 0.4 percent in August compared to last year, which is below expectations and a decrease from the previous month. Additionally, investment in fixed assets has decreased by 7.2 percent, which is also worse than anticipated.
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Unemployment Rate and Industrial Production
The unemployment rate in China reached 5.3 percent in August, which is higher than expected. Industrial production grew by 5.2 percent, but the lack of momentum in consumption and investment complicates Beijing's path to achieving growth targets.
Lin Song, chief economist for China at ING Group, recently analyzed the state of consumption and investment, stating that both remain low due to weak domestic demand in China. He predicted that GDP growth may stall in the third quarter, and the forecast of 4.6 percent growth for 2026 may need to be revised.
Song also noted that positive developments in industrial activities have been due to external demand, and China's improvements in technology and industry continue to support growth.
He added that sectors focusing on external demand and advanced technologies have performed well, while most other categories have performed poorly. For instance, car sales have decreased by 18.5 percent.
According to reports, furniture sales have also declined by 7.9 percent, but sales of home appliances experienced positive growth of 2.3 percent for the first time since September 2025.
Gold and jewelry sales, while improving in August, have decreased by 17.5 percent compared to last year, reaching their lowest level in four months. Recent measures to stimulate consumption include interest rate subsidies on consumer loans, which are expected to have a minimal impact on overall consumption growth.
Song also pointed out that with the diminishing impact of trade policies, we may see stabilization in retail sales, but a significant change will require more support.
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