CHINA’S economic growth has clearly slowed amidst escalating US-China trade tensions. The weakness in industry and business investment appears to be spilling over to consumption, as seen in the recent deceleration in retail sales.
The sluggish macro data highlights three areas of concern. First, producer prices entered deflation territory in July, which if prolonged, could have an adverse impact on industrial profits.
Second, infrastructure investment has been soft, despite more and faster pace of special local government bond issuance to finance them this year. Finally, nationwide urban unemployment rate has crept higher and now stands at 5.3%.