China's industrial output growth slowed in July 2025, while retail sales came in below forecasts, signaling a potential setback for the post-pandemic recovery. The country's industrial output growth decelerated, and retail sales increased by less than expected, according to data from the National Bureau of Statistics. This slowdown comes after Q2 2026 GDP growth was reported at 4.3%, falling short of government targets and analyst forecasts.
Economic Context
In June 2026, industrial output grew 5.3% year-on-year, beating the consensus forecast of 4.7%. Retail sales posted a modest 1% year-on-year increase, topping expectations of a 0.1% decline. However, July's Purchasing Managers' Index came in at 49.2, sliding below the 50.0 threshold that separates expansion from contraction.
Policy Response
The policy response so far has been careful and measured, with interest rate cuts, targeted lending programs, and modest fiscal support. Possible moves include further cuts to the reserve requirement ratio for banks, additional reductions in benchmark lending rates, or expanded fiscal spending directed at infrastructure and green energy projects.