China’s Economy Slows as Factory Output and Sales Weakest

China’s economic engine showed signs of strain in October, with factory output and retail sales growing at their slowest pace in over a year. The slowdown highlights the mounting pressures on policymakers to steer the $19 trillion economy through weakening domestic demand and ongoing trade tensions with the U.S.

Industrial output rose just 4.9% year-on-year in October, marking its weakest growth since August 2024. This figure lagged behind analysts’ expectations of a 5.5% increase and dropped sharply from September’s 6.5% growth. Meanwhile, retail sales, a key measure of consumer spending, expanded only 2.9%, the slowest pace since last August, slightly higher than the forecasted 2.8% but lower than September’s 3.0%.

Despite the recent Singles’ Day shopping surge, consumer sentiment remains subdued. Car sales, typically a bright spot in the fourth quarter, fell for the first time in eight months, signaling that even government incentives and promotions are struggling to lift domestic demand.

Investment trends are equally concerning. Fixed asset investment declined 1.7% in the first ten months of the year, deeper than the anticipated 0.8% drop. Low confidence among investors is compounding structural challenges, including persistent debt among local governments and a slowing property sector, which continues to see home prices fall.

China’s leadership has emphasized the importance of balancing industrial growth with boosting household consumption, but the economy’s heavy reliance on large infrastructure projects and state-owned enterprises suggests policymakers may be hesitant to introduce aggressive stimulus measures immediately. With a modest growth target of around 5% for the year, the government appears willing to let structural adjustments play out gradually.

The economic slowdown underscores the challenges of sustaining growth amid a complex mix of domestic pressures and external trade uncertainties. Analysts note that while there is room for policy support, the government is likely weighing long-term reforms over short-term fixes, aiming to strengthen household spending without undermining industrial output.