China’s economy fails to pick up after worst stretch in five quarters

China’s economy failed to pick up after its worst stretch in five quarters, with an uneven recovery in July held back by consumer spending still lagging industrial activity and investment.

Industrial output rose 5.1% from a year ago, the National Bureau of Statistics said Thursday, down from June’s increase of 5.3%. The median forecast of economists surveyed by Bloomberg was 5.2%. The urban jobless rate grew for the first time since February to reach 5.2%.

Retail sales climbed 2.7%, slightly better than forecast and up from a 2% uptick in the previous month. They likely benefited from a more favorable base of comparison and the summer holiday season.

The economy was “overall stable” in July with some improvement, the NBS said in a statement. “There’s an increasing negative impact from the changing external environment, while domestic demand remains insufficient. The switch from old to new growth drivers is causing temporary pains.”

The yuan extended losses both in onshore and offshore markets, after the central bank raised the daily reference rate for the currency to the strongest level in a week. The yield on the 10-year government bond climbed 1 basis points to 2.18%, after two straight sessions of declines.

The latest snapshot of the $17 trillion economy shows domestic demand is barely benefiting from recent government efforts to boost consumption and rectify imbalances in China’s recovery.

Relief for the consumer is unlikely so long as China’s real estate slump squeezes household budgets. Though the government rolled out its biggest rescue package for the property sector in May, it has yet to help the market bottom out quicker.

Investment in property development plunged 10.2% year on year in the first seven months of the year, after dropping 10.1% in the January-June period. That weighed on fixed-asset investment, which rose 3.6% in January-July, slower than a gain of 3.9% in the first six months.

Investment by state-owned enterprises slowed to 6.3% in the first seven months from 6.8% in the first six months, while that of private firms stagnated from a year ago.

An absence of a meaningful recovery in the economy is likely to amplify calls for additional policy stimulus as Beijing chases its annual growth target of around 5%. China’s top leaders already signaled a more supportive stance toward growth at a recent Politburo meeting by vowing to shift their focus to consumption, though the broad pledges have been met with skepticism in the market.

Figures released earlier this month already provided evidence of a weak start to the third quarter. China’s export growth unexpectedly slowed in July as overseas orders began to soften, while the country’s bank loans to the real economy contracted for the first time in 19 years.