China's Factory Output and Retail Sales Slow to Over One-Year Low in October, Intensifying Policy Pressure

Economic Growth Decelerates in October

China's factory output and retail sales recorded their slowest growth in over a year in October 2025, signaling mounting pressure on policymakers to stimulate the nation's $19 trillion export-driven economy. Data released by the National Bureau of Statistics (NBS) revealed that industrial production increased by 4.9% year-on-year, while retail sales expanded by 2.9%.

Both figures represent the weakest annual pace since August 2024. Industrial output fell short of a Reuters poll forecast of 5.5% and marked a significant drop from the 6.5% growth recorded in September. Retail sales, a key indicator of domestic consumption, slightly eased from September's 3.0% rise. This marks the fifth consecutive month of slowing growth for retail sales since a 6.4% peak in May.

Underlying Factors and Market Reactions

The deceleration in factory output has been partly attributed to the Golden Week national holiday and weakened external demand. Meanwhile, the ongoing reluctance of households to spend remains a significant factor impacting consumer confidence. Fred Neumann, chief Asia economist at HSBC, noted that 'China's economy is facing pressures from all sides' and that 'without significant further stimulus, it will be hard to reverse recent slowing in both investment and consumption.'

Beyond these headline figures, other economic indicators also painted a challenging picture. Fixed asset investment contracted by 1.7% in the first ten months of the year, a steeper decline than anticipated. The property sector continued to struggle, with new home prices falling in 61 of 70 major cities surveyed in October. Additionally, car sales ended an eight-month growth streak, despite expectations of a boost from expiring tax breaks and subsidies.

Policymakers Under Pressure for Reform

The latest data intensifies the call for Beijing's policymakers to implement further measures to revitalize the economy. Challenges include persistent supply and demand strains, the ongoing trade war with the United States, and weak domestic demand. Policymakers have acknowledged the necessity of structural reforms to address historical supply-demand imbalances, boost household consumption, and manage significant local government debt burdens.

However, officials also recognize that such reforms carry considerable political risks, especially amidst intensifying trade pressures. The ruling Communist Party met in October to outline the country's economic direction for the next five years, pledging to significantly increase household consumption's share of GDP while reinforcing its vast industrial base. Moody's Ratings has warned that China's domestic demand 'may be slow to revive,' emphasizing the importance of improving income distribution and strengthening social safety nets to stimulate spending.