BEIJING, Sept 15 (Reuters) - China's manufacturing output and retail sales growth in August both hit their lowest levels a year earlier, keeping pressure on Beijing to roll out more stimulus to counter a sharp slowdown in the world's second-largest economy. The disappointing data has divided economists over whether policymakers need more short-term fiscal support to achieve their annual growth target of around 5%. Manufacturers are awaiting further clarity on a U.S. trade deal, while domestic demand is being held back by a volatile job market and a real estate crisis.
"The strong start to the year still leaves this year's growth target within reach, but similar to the situation last year, further stimulus support may be needed to ensure a strong end to the year," said Song Lin, chief economist for Greater China at ING.
Xu Tianchen, a senior economist at the Economist Intelligence Unit, said: "We had expected retail sales growth to remain above 4% until September, driven by consumer subsidies, but the performance in recent months has been disappointing."
Xu Tianchen said that China's key economic indicators are likely to deteriorate further in the fourth quarter due to base effects. Officials typically seek further policy support before the end of the year to ensure the economy meets its growth targets.
He added: "This will increase the likelihood of stimulus measures in the fourth quarter, including monetary easing, early bond issuance, and possible fiscal expansion." Zheng Zhajie, director of China's National Development and Reform Commission, said last week that Beijing will make full use of fiscal and monetary policies and improve its toolbox to achieve annual targets.
Adding to the pressure, weather has hurt manufacturing activity, with the hottest weather since 1961 and the longest rainy season since then. Huang Zichun, China economist at Capital Economics, said: "In addition, there are more fundamental headwinds, including waning fiscal support and efforts to reduce overcapacity."
She added: "While weak data could trigger some additional policy easing in the coming months, it is unlikely to be enough to reverse the situation."
Reporting by Kevin Yao and Joe Cash; Additional reporting by Zhang Yukun; Editing by Sam Holmes
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