Daily Economic Briefing: Another China domestic demand disappointment

Research evidence excerpt

J P M O R G A N

Global Economic Research

17 August 2026

Daily Economic Briefing

Another China domestic demand disappointment

After China’s weak 2Q, we had expected increased fiscal support and an

export-led lift to domestic production to promote a growth rebound this

quarter. But China’s 3Q has had a disappointingly soft start. In contrast to our

forecast for a pickup, both consumer spending and fixed asset investment (FAI)

weakened further in July, with retail sales falling 0.3%m/m and FAI’s

contraction widening to -12.8%oya. This domestic demand weakness looks to

have weighed on manufacturing output, which fell 0.3%m/m despite resilient

exports.

Economic and Policy Research

We’ve revised 3Q GDP growth down 0.7%-pt to 3.6%ar, and look for this news

to increase pressure on policymakers to support growth. Despite the July

Politburo’s call for faster deployment of existing fiscal support, the pickup in

government bond issuance has been limited. We still expect the full

government bond quota to be utilized by year-end, with the fiscal impulse

boosting our forecast for the coming two quarters (4Q26: +0.4%-pt to 5.3%ar,

1Q27: +0.3%-pt to 4.8%ar).

Nora Szentivanyi

China activity indicators

%3m/3m, saar; seas. adj. by J.P. Morgan

15

%oya

Retail sales

(real)

10

30

IP (real)

20

5

10

0

-5

-10

Jan 23

0

FAI

(nominal)

-10

-20

Jul 23

Source: NBS, J.P. Morgan

Jan 24

Jul 24

Jan 25

Jul 25

Jan 26

Jul 26

Elsewhere, an anticipated downshift in global consumer spending looks to be

taking hold (see today’s Focus). Global goods spending outside China was up

0.3% m/m in June, with the annualized pace in the last three months cooling

to a 2.3%ar. The US delivered a 0.3%m/m drop in July, pointing to further

slowing ahead.

As the consumer cools, we look for a business sector lift to support stronger

global growth this quarter. August surveys should help to track growth

momentum this week. Friday’s composite August DM flash PMI is expected

to moderate to a level consistent with our current quarter 1.9%ar GDP growth

forecast.

In the US, the Empire State manufacturing survey’s headline index jumped 5

points to its highest reading in more than four years. But the underlying details

…