Home building supports Chinese economyChinese economic data
Chinese retail sales rose at an 8.8 per cent annual rate in the year to July, (forecast:  +9.1 per cent), down from 9.0 per cent in June.
Chinese industrial production rose at a 6.0 per cent annual rate in June, below the forecast average (+6.3 per cent). Production had risen by 6.0 per cent in the year to June.
Chinese property investment rose by 10.2 per cent in the seven months to July on a year earlier, up from 9.7 per cent in the six months to June. Building starts are growing at a 14.4 per cent annual pace.
Chinese urban investment rose by 5.5 per cent in the seven months to July on a year earlier (forecast: +6.0 per cent), declining from 6.0 per cent growth in the six months to June. 
What does it all mean?
The Chinese economy has continued to soften. While annual growth rates would still be regarded as impressive for any other industrial economy, for China the data suggests a slowing of economic momentum. Some of the weakening growth would also reflect the maturation of the economy – China moving into the ranks of advanced global economies. Simply, the economy can’t sustainably grow near 10 per cent as it has done in the past.
With inflation contained, Chinese authorities are likely to further stimulate the economy – especially considering that the effects of higher US tariffs are yet to be fully felt. Higher oil prices are also an influence in slowing retail spending.
The ‘new normal’ of retail sales is 8-9 per cent annual growth with production 5.5-6.5 per cent.
The Chinese consumer is buying mobile phones, furniture, medicines, food and personal care products but shunning home appliances, office supplies and cars. Sales are stronger in rural areas rather than cities. Production is strong for computer, communications and other electronic equipment manufacturing and in electricity, heat, gas and water production.
One sign of strength is activity in the property sector with building starts up 14.4 per cent over the year (mainly homes). As homes are built, this will create extra demand for household equipment and furniture.
What do the figures show?Chinese Economy
Chinese retail sales rose at an 8.8 per cent annual rate in the year to July, (forecast: +9.1 per cent), down from 9.0 per cent in June. Sales rose 0.67 per cent in July.
Annual retail growth rates were: cereals and oils, foodstuffs (up 9.5 per cent); beverages (up 6.8 per cent); tobacco and alcohol (up 6.3 per cent); medicines (up 9.9 per cent); garments (up 8.7 per cent); cosmetics (up 7.8 per cent); 
jewellery (up 8.2 per cent); personal care (up 11.3 per cent); home appliances (up 0.6 per cent); office supplies (up 1.8 per cent); furniture (up 11.1 per cent); telecom (up 9.6 per cent); oil products (up 18.4 per cent); cars (down 2 per cent); building materials (up 5.4 per cent).
Chinese industrial production rose at a 6.0 per cent annual rate in June, below the forecast average (+6.3 per cent). Production rose by 6.0 per cent in the year to June. Production rose by 0.48 per cent in July according to the National Bureau of Statistics.
Across industries, annual growth rates were: textiles (up 0.6 per cent); chemicals (up 3.5 per cent); non-metal minerals (up 5.2 per cent); ferrous metals (up 6.6 per cent); general equipment (up 6.9 per cent); transport equipment (down 1.9 per cent); machinery (up 5.7 per cent); computer, communications and other electronic equipment manufacturing (up 13.5 per cent); electricity and heat production (up 8.8 per cent).
Chinese urban investment rose by 5.5 per cent annual growth rate in the seven months to July on a year earlier (forecast: +6.0 per cent), declining from 6.0 per cent in the six months to June. Strength was in primary industry (up 13.7 per cent) and real estate (see below). Weakness was in power generation (down 11.6 per cent).
Chinese property investment rose by 10.2 per cent in the seven months to July on a year earlier, up from 9.7 per cent in the six months to June. Floor space newly started for construction was up 14.4 per cent on a year ago.
China’s unemployment rate rose from 4.8 per cent to 5.1 per cent in July.
What is the importance of the economic data?
China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussieeconomy.
What are the implications for interest rates and investors?
Chinese consumers are still spending but discretionary goods like pharmacy-type items, rather than essential goods, driving growth. Again, production continues to shift up to more elaborately-transformed products like electronic equipment in preference to simple manufactures like clothing and textiles.
One area of growth is property investment – with new starts accelerating in the past three months.
Investors should watch for more initiatives from Chinese authorities to stimulate activity. This may have implications for the equities and currency markets.
CommSec expects Australian interest rates to be unchanged until at least early 2019.
Published by Craig James, Chief Economist, CommSec