Chinese industrial production rose 3.7 percent on the year in July after growth of 4.4 percent in June, well below the consensus forecast for an increase of 4.3 percent. Output rose 0.01 percent on the month after increasing 0.68 percent previously.

Slower growth in industrial production in July was largely driven by the manufacturing sector, with output there increasing 3.9 percent on the year after an increase of 4.2 percent in June. This is broadly in line with previously published PMI survey data which also showed weaker conditions in the manufacturing sector in July. Growth in mining output also slowed, up 1.3 percent on the year after advancing 1.7 percent previously, while year-over-year growth in utilities output was unchanged at 4.1 percent.

Industrial production and other key activity data published today show weaker year-over-year growth and near-zero month-over-month growth in July. This further loss of momentum in China's economic recovery is in line with PMI survey data and the assessment of senior China's leadership that the economy is facing"difficulties and challenges". Along with weak inflation data published last week, today's activity data may strengthen the case for some policy measures to support stronger demand

With today's activity data weaker than expected, the China ECDI has fallen from 14 to minus 71 and the ECDI-P has dropped from 20 to minus 100, indicating that recent Chinese data in sum are now coming in far below consensus forecasts after recent outperformance.

Year-over-year growth in industrial production is expected to slow slightly to 4.3 percent in July versus growth of 4.4 percent in June which was higher than expected.

Industrial production measures the change in the total inflation adjusted value of output produced by manufacturers, mines and utilities. Data are compared with the same month a year earlier.

Chinese data can have a broad impact on the currency markets due to China's dominant influence on the global economy and investor sentiment. It's a leading indicator of economic health. Production is the dominant driver of the economy and reacts quickly to ups and downs in the business cycle. No data are published in February for January.

The industrial growth rate is used to reflect a certain period of increase or decrease in volume of industrial production indicators. The indicator can be used to estimate the short term trend of the industrial economy, to judge the extent of the economic boom and also to be an important reference and basis for the formulation and adjustment of economic policies.