China: Better industrial production, sluggish investment, slower retail sales growth; lowering Q3 GDP forecast

China's August activity data were mixed, underscoring the economy's continued imbalance between strong supply and weak demand. Industrial production beat expectations, with growth accelerating to 5.2% yoy in August from 4.5% yoy in July, amid stronger exports and faster output in electric machinery, chemicals and pharmaceuticals. By contrast, fixed asset investment and retail sales missed expectations somewhat. FAI contracted 10.8% yoy in August on a single-month basis, and retail sales growth slowed to 0.4% yoy from 0.6% yoy, with both goods and restaurant sales weakening. The Services Industry Output Index eased to 4.1% yoy. Labor market conditions also softened, with the unemployment rate rising to 5.3%. Reflecting weaker-than-expected quarter-to-date activity data, we lower our Q3 real GDP growth forecast to 4.4% yoy (vs. 4.6% previously), which mechanically reduces our 2026 full-year real GDP forecast to 4.5% yoy (vs. 4.6% previously).