#chinajulyoutputretailinvestmentallmiss
China's economy is slowing on every front at once, and July was the month it stopped being a property story.
Retail sales grew just 0.6% y/y, down from 1.0% in June and well short of the 1.5% consensus. Industrial output slowed to 4.5% from 5.3%, missing forecasts. Fixed-asset investment contracted 6.7% in the first seven months, deeper than the 5.7% drop through June. All three missed at the same time - a broader-based deceleration than the Q2 GDP miss alone suggested.
The backdrop was already weak. Q2 GDP came in at 4.3% y/y, down from 5.0% in Q1 and the softest reading in more than three years. That leaves H1 growth at 4.7%, inside Beijing's 4.5-5% target range.
Property is still the anchor drag. Real estate investment fell 19.2% y/y in the Jan-July period, and new home prices in 70 major cities dropped 3.2% y/y in July, the 36th straight month of declines. Infrastructure investment fell 3.6%, so fiscal spending isn't yet offsetting it.
The credit data is what I would flag hardest. New yuan loans contracted by CNY 340bn in July against CNY 1.61tn in June, with households repaying CNY 460.3bn and companies CNY 130bn. That's the largest net repayment since the series began in 2002. Outstanding loan growth slowed to 5.1%, a record low, and M2 growth eased to 7.7%.
The credit print matters more than the activity misses. Households and firms paying down debt rather than borrowing is a confidence problem, and rate cuts don't fix confidence. Deflation risk is creeping back too: CPI rose only 0.5% in July, half of June's 1.0%, and PPI slowed to 3.5% from 4.1%. China spent August to October last year in outright deflation.
There are still bright spots. High-tech manufacturing grew 13.8% and equipment manufacturing 9.7%, driven by export demand for lithium batteries, industrial robots and 3D printers. Exports keep doing the heavy lifting while domestic demand sits out.
The Politburo struck a more supportive tone on July 30 but announced nothing new, promising "pragmatic and effective new policies in a timely manner." Unemployment ticking up to 5.2% from 5.0% makes that harder to sustain.
Three things should be watched into Q4: whether credit demand stabilises at all, whether Beijing moves on property beyond incremental measures, and whether the full-year target gets quietly reframed rather than met.
