China's industrial production growth slows to 6.4% in July

GDP is still growing faster than the annual target of 6.5% despite the slowdown.

China's industrial production (IP) growth reached 6.4% in July, 1.2 ppt lower than June's, according to data from the National Bureau of Statistics of China (NBS).

According to Standard Chartered, this resembled the normalisation in April following an impressive quarter-end rebound in March.

Fixed asset investment (FAI) also dropped to 6.5% from 8.8% in June as both manufacturing and property investments decreased. Meanwhile, infrastructure investment remained stable.

Retail sales growth slid to 10.4%. Export and import growth also slowed in July at 11.2% and 14.7%.

Hot weather factored into the slowdown of the IP and FAI. The average temperature in July hit a 50-year record high, disrupting production and construction activities.

The NBS said, "Generally speaking, the national economy in July was stable with the sound momentum maintained and the structural adjustment deepened. However, we must be aware that the international environment is still complicated and changing, the structural contradictions at home are acute and there are potential troubles lurking."

Here's more from Standard Chartered:

Despite the slowdown, we think GDP is still growing faster than the annual target of 6.5%, and a major shift in the policy stance is therefore not warranted. IP growth in July suggests the secondary industry (roughly 40% of GDP) grew 6.0-6.4% YoY.

The services-sector production index rose 8.3% YoY in July, suggesting the tertiary industry (roughly 54% of GDP) grew 7.5-7.7% YoY. Based on this, we estimate GDP growth at around 6.7% YoY in July.

The economy faces headwinds in H2, as policies may turn less accommodative and property-market tightening measures may affect investment more significantly.

Our monthly growth tracker predicts downside risks. Of the 15 current indicators, 10 weakened and four strengthened in July; five of the seven forward looking indicators weakened. Both compared with very strong readings in June.

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