Chinese workers work at a construction site at sunset in Chongqing, China on March 6, 2005.

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BEIJING – China’s retail sales and industrial production picked up pace in August, posting better-than-expected growth, according to National Bureau of Statistics data released on Friday.

Retail sales rose 4.6% in August from a year earlier, beating the 3% growth forecast in a Reuters poll. The increase was also faster than last year’s 2.5% in July.

Industrial production grew 4.5% in August from a year earlier, better than the 3.9% forecast and faster than the 3.7% increase reported in July.

However, fixed investment rose 3.2% year-on-year in August. This missed expectations for a 3.3% increase and was slower than the 3.4% reported in July.

The figure was weighed down by a sharper decline in real estate investment and a slowdown in infrastructure investment. Only in the manufacturing sector did the pace of investment accelerate.

Statistics bureau spokesman Fu Linghui said the real estate market is still in a period of “adjustment” and is seeing declines in sales and investments.

The Statistics Office release described the August data as a “marginal improvement”.

“The national economy showed good recovery dynamics, high-quality development made solid progress and positive factors accumulated,” said the press release from the statistics office. “However, we should be clear that there are still many unstable and uncertain factors in the external environment.”

Within retail sales, online sales of physical goods rose 7.6% in August from a year earlier, CNBC calculates using official data accessed via Wind.

In the automotive sector, sales rose by 1.1%. Categories with faster growth included cosmetics, up 9.7%, and communications equipment, up 8.5% in August from a year ago. Catering sales increased 12.4% during this period.

Further interest rate cuts

Late Thursday, the People’s Bank of China said it would cut the amount of cash banks must hold on hand by 25 basis points, effective Friday. It was the second cut in the reserve requirement ratio this year since March.

In recent weeks, Beijing has announced a series of measures to support the property market and consumption.

Monetary policy has remained relatively loose compared to aggressive interest rate hikes in the US and Europe.

Also coming into effect on Friday is a cut in the reserve requirement ratio for financial institutions from 6% to 4%. The planned cut was announced two weeks ago.

The central bank has also cut other key interest rates, such as the key one-year loan rate.

China’s slowing economic growth

Moody’s on Thursday downgraded its outlook for China’s real estate sector to negative from stable. The company expects revenue to decline by approximately 5% over the next six to 12 months.

“While the Chinese government has recently increased policy support for the real estate sector, we expect the impact on real estate sales to be short-lived and vary by city level,” said Cedric Lai, vice president and senior analyst at Moody’s , in a press release.

Workers make pods for e-cigarettes on the production line at Kanger Tech, one of the leading manufacturers of e-cigarette products in China, on September 24, 2019 in Shenzhen, China.

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Uncertainty about future income has kept consumer spending relatively subdued.

China’s consumer price index rose 0.1% year-on-year in August, reversing a decline in July. The core CPI, which excludes food and energy prices, rose at the same pace, rising 0.8% year-on-year in both months.

— This is breaking news. Please check back for updates.

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