CHINA’S economy showed resilience in August, with faster-than-expected growth in factory output and retail sales shoring up a relatively weak recovery, but a deepening property slump weighed on the outlook.

The better-than-expected figures show China’s economy is gaining some steam, after narrowly escaping a contraction in the June quarter and lifting recovery prospects marginally for the rest of the year.

Industrial output grew 4.2% in August from a year earlier, the fastest pace since March, according to the National Bureau of Statistics (NBS). That beat July’s 3.8% expansion.

Retail sales rose 5.4% from a year ago, the quickest in six months and also beating forecasts for 3.5% growth and the 2.7% gain in July.

“This is due to a lower base for comparison — the Delta wave was weighing on economic activity in August 2021,” said Julian Evans-Pritchard, a China economist at Capital Economics.

Although the upbeat data lift some of the gloom hanging over the recovery, which had been clouded by weak trade data and slow credit growth, Evans-Pritchard does not expect the strength to sustain into September.

The auto industry was a big driver of both factory output and retail sales, with new energy vehicle production surging 117%, helped by government incentives for cleaner cars.

However, outages at several State oil refiners and independent plants and thinning margins kept crude throughput near two-year lows. Daily coal output also slipped to a three-month low.

“Since the start of this year, the situation facing economic development has become more complex and severe than that in 2020,” NBS spokesperson Fu Linghui said, citing the risk of a global downturn and challenges around China’s COVID controls. However, he said recent policy support was having some effect.

In contrast to the upbeat activity data, the property sector contracted further in August as home prices, investment and sales extended losses.

Property investment last month fell 13.8%, the fastest pace since December 2021, according to calculations based on official data.

New home prices fell 1.3% year on year in August, the fastest since August 2015, extending a 0.9% decline in July.

Bruce Pang, a chief economist at Jones Lang Lasalle, doesn’t expect China’s central bank to cut interest rates in the near term.

Easing could instead come through liquidity measures and support for manufacturing and green investment.

“Other policy options, including a reserve requirement ratio cut, remain on the table,” Pang said.

Others expect a cut in the benchmark loan prime rate, after large banks lowered deposit rates, which could ease pressure on margins. (SD-Agencies)