China's factory output grew at the lowest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the rapidly cooling housing market increasingly drags on activity in other sectors from cement to steel and saps consumer confidence.
Industrial output rose 6.9 percent in August from a year earlier - the lowest since 2008 when the economy was buffeted by the global financial crisis - compared with expectations for 8.8 percent and slowing sharply from 9.0 percent in July.
"The August data may point to a hard landing. The extent of growth slowdown in the third quarter won't be small," said Xu Gao, chief economist at Everbright Securities in Beijing.
"The chances of cutting interest rates and bank reserve requirements have increased. I think they are more likely to cut interest rates."
Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government's full-year growth target of around 7.5 percent in jeopardy unless it takes more aggressive policy measures. Experts reckon output growth of around 9 percent would be needed to attain such a goal.
"Short of outright policy easing, China will likely miss the 7.5 percent growth target this year, and a sharp economic slowdown will endanger the undergoing structural reforms," Liu Li-Gang and Zhou Hao at ANZ wrote in a note.
"As such, we reckon that Chinese authorities should further relax monetary policy as soon as possible to prevent the growth momentum from decelerating further."
Reinforcing the tepid economic activity, China's power generation declined for the first time in four years, falling 2.2 percent in August from a year earlier.
Jiang Yuan, a senior statistician with the bureau, said in a statement that the dip in August factory growth was due to a combination of factors: weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement, and vehicles.
China's economy got off to a weak start this year as first-quarter growth cooled to an 18-month low of 7.4 percent. A raft of stimulus measures pushed that up slightly to 7.5 percent in the second quarter, but soft July and August data suggest the boost from those steps is already quickly waning.
"The government must take forceful policy measures to stabilise growth," said Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai.