China’s industrial output grows at slowest pace in four months

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China’s industrial output grew at its slowest pace in four months in July, adding to signs of a weak start to the third quarter as a sharp slowdown in the property market weighs on the world’s second-largest economy.

Industrial output rose 5.1 percent year-on-year in July, official data from the National Bureau of Statistics showed on Thursday, slightly below the 5.2 percent increase forecast by economists polled by Bloomberg and the 5.3 percent growth the previous month.

The unemployment rate was 5.2 percent in July, in line with analysts’ expectations and up from 5 percent in June and the first increase in unemployment since February.

President Xi Jinping has focused on industry, especially high-tech manufacturing, to shore up China’s economy after a three-year property slump hurt household consumption and undermined investor confidence.

The government has announced gradual measures to try to stabilize the housing market and revitalize household demand, but has refrained from offering bazooka-style stimulus.

The July data release came on the heels of other signs of weakness, including weaker factory activity and exports, while bank loans to the real economy fell for the first time since 2005.

“China’s July activity data pointed to a weak start to the third quarter,” Goldman Sachs analysts wrote in a note. They said they expected more easing measures in the coming months as the government tries to secure its full-year economic growth target of 5 percent, but added: “It may take some time for policy to kick in.” GDP growth was 4.7 percent in the June quarter, below expectations.

The National Statistics Office said the economy was “stable and making progress” in July, but added there were “increasing negative impacts… from changes in the external environment” and admitted that domestic demand “remains deficient”.

The National Statistics Office said that “the continued recovery and improvement of the economy still faces many difficulties and challenges.”

Retail sales rose 2.7% in July, slightly above analysts’ expectations for a 2.6% gain and surpassing the 2% increase in June. But the data showed that policymakers have yet to solve China’s two-track economy, where strong exports and manufacturing are at odds with weak household demand.

“The transition between old and new growth engines is facing some pain,” the National Bureau of Statistics said.

New home prices fell 4.2 percent year-on-year in China’s largest cities, while second-hand home prices fell 8.8 percent, the National Bureau of Statistics said.

Fixed-asset investment was “probably the biggest disappointment” in the data, according to ING, rising 3.6% in January-July, below a Bloomberg analyst’s forecast of 3.9% and below the 3.9% figure for January-June.

The National Bureau of Statistics did not provide a figure for July, but analysts estimated growth at 1.9 percent year-on-year, down from 3.7 percent in the previous month.

Manufacturing investment was strong, although analysts at Nomura noted a pullback in some “green” sectors that suffered from overcapacity.

But overall, the figure was down on lower real estate investment and weaker-than-expected private and government investment, another negative sign for domestic demand, analysts said.

Goldman Sachs said it expected the government to announce further housing easing measures in the coming months, “including further easing of restrictions on home purchases in major cities and further cuts in mortgage interest rates.” But it said weak demand in smaller cities and among private developers meant such measures would lead to a “very slow” recovery.

The dire state of the property market helped prompt the world’s largest steelmaker, China’s Baowu Steel Group, to warn this week that producers were facing their worst slowdown since the devastating recessions of 2008 and 2015.

Steel production volumes fell 4 percent year-on-year in July, while cement output fell 12.4 percent, the National Statistics Office said.