CHENGDU, CHINA – OCTOBER 18: People walk past the Louis Vuitton store in Taikoo Li, an upscale shopping area that combines traditional Sichuan-style architecture with modern luxury retail on October 18, 2025 in Chengdu, China.
Chen Xin | Getty Images News | Getty Images
China’s economic slowdown worsened in October, dragged down by weak consumer demand and a deepening real estate recession, as the long holiday period further weighed on factory activity.
Fixed asset investment, including real estate, fell by 1.7% in the first 10 months of the year, sharply down from a 0.5% decline in the January-September period, data released by the Office for National Statistics on Friday showed. Analysts polled by Reuters had expected a decline of 0.8%.
The last time China recorded a contraction in fixed asset investment was in 2020 during the pandemic, according to data dating back to 1992 from Wind Information, a private database covering China.
On a monthly basis, fixed asset investment fell 11.4% from a year earlier, according to estimates by Goldman Sachs, the lowest level since early 2020, when the first coronavirus lockdowns began. The bank blamed the decline on the Chinese government’s efforts to curb industrial overcapacity and a weak housing market.
Within this segment, real estate investment continued to decline, falling by 14.7% in the year to October, after falling by 13.9% in the first nine months.
Manufacturing investment increased by 2.7%, and public works spending, which includes electricity, fuel and water supplies, increased by 12.5%.
Industrial production rose 4.9% in October, slowing from 6.5% in the previous month and falling short of the expected 5.5% increase.
China’s manufacturing activity contracted more than expected in October, falling to its lowest level in six months, as a weeklong holiday from Oct. 1 to Oct. 8 shut down most factories across the country.
Retail sales in October increased by 2.9% compared to the same month last year. LSEG data showed that consumption fell to the lowest level of the year for the fifth month in a row, although it beat the 2.8% growth forecast in a Reuters poll.
The survey-based urban unemployment rate fell to 5.1% last month from 5.2% in September.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the sharp decline in fixed asset investment was mainly driven by lackluster investment in the real estate sector and infrastructure.
Yuhan Zhang, chief economist at the Conference Board China Center, said in a note that manufacturing investment is showing “slow and uneven growth” as state-owned enterprises increase spending on infrastructure such as electricity, heat and gas supplies, while foreign investment has sharply contracted.
“Policy-driven investment in infrastructure, advanced manufacturing and industrial upgrading will continue,” he added.
In a sign that demand in the beleaguered housing sector remains weak, new home prices in China fell 0.5% month-on-month in October, the steepest month-on-month decline since October last year, another official data released on Friday showed. House prices in October fell by an annualized rate of 2.2%.
According to LSEG data, consumer prices rose 0.2% in October compared to the same month last year, the strongest inflation rate since January this year and the first positive growth since June.
Core CPI, which excludes food and energy, rose 1.2% year-on-year, the highest level since February 2024, according to data provider Wind Information.
China’s exports unexpectedly fell in October for the first time in about two years as tensions with the US government over trade intensified ahead of an agreement at the end of the month.
Last month, U.S. President Donald Trump and Chinese leader Xi Jinping agreed to reduce retaliatory tariffs and suspend a number of restrictions for one year.
Economists widely expect that Beijing will come under greater pressure to stimulate domestic demand as companies’ front-loading activity tapers off and global demand may not be able to fully offset the deepening decline in shipments to the United States.
“We don’t expect any stimulus for the rest of this year,” Zhang said, noting that the economy appears to remain on track to achieve the 5% growth target, although fiscal policy may turn more supportive early next year.
China’s economic growth slowed to 4.8% in the third quarter, after expanding by 5.2% in the second quarter and 5.4% in the first quarter.
