(Bloomberg) -- China’s broad fiscal spending expanded at the fastest pace in almost three years, pushing the deficit to another record as the government steers an economy grappling with weakening demand and higher tariffs.

Total expenditure rose 9.3% to 21.5 trillion yuan ($3 trillion) in the first seven months of 2025 from a year ago, according to Bloomberg calculations based on data released by the Finance Ministry on Tuesday. That’s the fastest increase since August 2022.

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As a result, the broad fiscal gap reached 5.6 trillion yuan in the January-July period, with the shortfall widening 49% from a year ago.

Faster fiscal stimulus — which includes everything from infrastructure spending to civil servants’ salaries — didn’t translate into quicker economic growth in July, when activities recorded an unexpectedly sharp slowdown.

Authorities blamed extreme weather that disrupted construction, while local governments experienced a temporary funding shortage for their program of consumer subsidies.

The government’s focus is tilting toward social welfare from infrastructure, which last month may have contributed to the biggest contraction in overall investment since early 2020.

Government spending that covers social outlays in areas like education expanded at a faster clip in July from June. Huatai Securities estimates that expenditure on social security and employment as well as public health grew in double digits year-on-year.

Meanwhile, infrastructure spending fell 3.6% from a year ago in July, extending from the 9.9% drop a month ago, according to GF Securities. Apart from weather disruptions, there may be a lag in the allocation of central government funds for major construction projects, analysts from GF Securities said in a report Tuesday.

What Bloomberg Economics Says...

“Should the economy slow noticeably, there could be some modest additional stimulus, potentially in the form of frontloading government bond issuance for 2026. Indeed, the weak growth momentum in July, should it continue, points to that possibility.”

— David Qu and Chang Shu. For full analysis, click here

Authorities may need to inject additional fiscal stimulus later this year to cushion the economy from the worsening property market, US tariffs and the negative impact on growth from the government’s “anti-involution” campaign that targets overcapacity, according to Goldman Sachs Group Inc.

“To ensure stable growth and employment into next year, we maintain our view that additional fiscal expansion may be needed towards year-end,” Goldman Sachs economists including Wang Lisheng said in a report.

The broad spending combines outlays under the general budget, which mainly include everyday allocations, with expenditure in the government fund budget, which is weighted more toward capital investment projects.

Total income in China’s two main fiscal books was almost unchanged from a year ago in the first seven months. Tax revenue fell 0.3% from a year ago, narrowing its decline from June.

The decline in land sales narrowed in the first seven months from the first half of the year, supported by premium land parcels recently sold in some of the biggest cities at record prices.

(Updates with additional details throughout.)

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