After a stronger-than-expected first half of 2025, we had been expecting a cooling of the economy in the second half of the year; however the moderation of growth in July was more than anticipated.
While exports continued to surprise on the upside in July amid a surprisingly resilient external demand environment, overall, other economic activity data were down across the board, with retail sales, fixed asset investment, and value added of industry growth all reaching the lowest levels of the year. Domestic confidence has remained soft, and this is being translated into softer consumption and investment activity.
Furthermore, China’s 70-city property price index showed that prices continued to decline, with widespread weakness on a city level.
Extreme weather has been blamed for the slowdown in July, and as such, some rebound is expected in August, but data has been slowing for several months regardless and could once again present a case for more policy support.