China’s economy lost momentum across the board in July, official data showed Monday, with consumer spending stalling, urban investment contracting at a faster pace, and unemployment ticking higher, adding to pressure on Beijing to step up support in the second half of the year.
Retail sales rose just 0.6% from a year earlier, according to the National Bureau of Statistics, missing the 1.5% gain expected in a Reuters poll and slowing from 1% growth in June. The tepid reading underscores a deepening demand weakness despite resilient industrial output and exports.
China’s urban fixed-asset investment, which includes real estate and infrastructure, shrank 6.7% year on year in the January-to-July period, worse than the 6% decline expected in the poll and steeper than the 5.7% drop in the first half. Real estate investment plunged 19.2% in the first seven months, while infrastructure investment fell 3.6% and manufacturing investment declined 1.7%.
Industrial output rose 4.5% in July, also missing the 4.8% forecast and down from 5.3% in June. The urban unemployment rate edged up to 5.2% from 5% the prior month.
The data, unusually released at 3 p.m. instead of the standard 10 a.m., reinforced concerns about the health of the world’s second-largest economy, which has been grappling with a deepening supply-demand imbalance.
Consumption under pressure
Retail sales growth has slowed sharply over the past year. Nominal growth eased to just 1.3% in the first half of 2026 from 5% in the same period last year, according to Goldman Sachs. The bank attributes much of the slowdown to a government trade-in subsidy program that pulled purchases forward and has since become a drag. “Real momentum was likely even weaker given higher CPI inflation,” Goldman economists said in a note Friday.
Goldman expects sales growth to remain weak in the second half as the fading trade-in support continues to depress consumption, leaving full-year growth at about 1.5%.
Lending data painted a similarly cautious picture. New bank loans issued in July recorded their largest monthly decline on record, according to Barclays calculations of official data released Friday by the People’s Bank of China. Household loans, including mortgages, shrank in July after a brief recovery in June, CNBC’s calculation of official figures showed, amid soft housing activity and a weak labor market.
Mortgage demand has weakened through the multi-year property downturn, while banks, wary of borrowers’ repayment capacity, have grown more reluctant to lend.
Jobs picture worse than official
The labor market may be softer than the headline numbers suggest. A private survey by the team of Li Daokui, an economics professor at Tsinghua University, put China’s broad unemployment rate at 10.2% as of July, well above the official rate of around 5%. The survey includes people who have been jobless for the past two years and are no longer counted in the official labor force survey. It also found that more than half of roughly 24 million long-term unemployed are aged 16 to 24. The official youth unemployment rate stood at 14.9% in June, the highest for that month since the government excluded university students from the sample more than two years ago.
Behind the weak hiring is a slump in investment. Urban investment declined for the first time in decades last year, falling 3.8%, and has deteriorated further this year, as the property downturn and tighter constraints on local government borrowing hamper a traditional growth driver. Li called the pullback in investment “unprecedented” and urged a substantial expansion in government borrowing, more than doubling this year’s planned 12 trillion yuan ($1.7 trillion) in new debt issuance.
Factory activity contracts
Factory and construction activity also lost steam in July. The official manufacturing purchasing managers’ index unexpectedly contracted for the first time since February, as domestic orders slumped and extreme weather, including typhoons and heavy rainfall, disrupted port activity and business operations.
Exports remain a rare bright spot, with the global AI buildout helping offset headwinds from the Middle East conflict. Exports rose 23.9% in July from a year earlier, beating estimates, after a 27% surge in June that was the fastest since 2021. Imports climbed 27.5%, short of forecasts.
However, Beijing’s massive trade surplus has become a standing grievance for trading partners, raising the risk of fresh trade restrictions aimed at forcing a rebalancing, analysts say. The surplus reached $687.4 billion in the January-to-July period, putting it on track for another trillion-dollar-plus surplus in 2026.
The July figures come after China posted its slowest growth since late 2022 in the second quarter, expanding 4.3% from a year earlier. First-half GDP growth of 4.7% keeps the economy on track to meet Beijing’s target range of 4.5% to 5% for the year.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/17/china-economy-sales-investment-july-.html
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