China's factory output quickens in August as consumption and investment weaken

China's industrial production accelerated in August, even as consumer spending and investment weakened, underscoring a widening gap between the country's manufacturing and export strength and the fragility of domestic demand.

Factory output expanded 5.2% year-on-year last month, up from 4.5% in July and ahead of market expectations of a 4.8% rise, data from the National Bureau of Statistics showed. The pickup offered a rare bright spot in an otherwise subdued economic picture.

Retail sales, the main gauge of household consumption, grew just 0.4% in August, easing from 0.6% in July and falling short of the 0.8% increase analysts had anticipated. Fixed-asset investment, which covers infrastructure and property, contracted 7.2% in the first eight months of the year, matching forecasts but steeper than the 6.7% decline recorded through July.

The figures point to a persistent mismatch: production and exports remain relatively resilient, while consumption and investment struggle to gain traction. That combination has raised pressure on policymakers to roll out additional support measures to shore up the weaker parts of the economy.

China entered the second half of the year on an uncertain footing, with factory activity, consumption and investment all lacking momentum. Although manufacturing improved in August, it remained in contraction, and services activity stayed sluggish.

Severe weather is likely to have weighed on activity during the month. Four typhoons made landfall in China in August, disrupting operations across the east-coast manufacturing and logistics corridor.

In response, Beijing has accelerated government bond issuance and broadened loan interest subsidies for small private firms and consumers. The central bank has promised further policy support but has not signalled explicit cuts to policy rates or the reserve-requirement ratio.

Analysts at ANZ said September could be a crucial window for measures to revive business confidence before the Golden Week holidays in October.