Fri, Aug 10, 2018 - Page 10 News List

China PPI falls as consumer prices rise

COMFORT ZONE:Economists expected China’s proposed tariffs on US goods to push up retail prices, but at 2.1%, the consumer price index rose just slightly more than foreseen

Reuters, BEIJING

China’s factory price inflation cooled last month, but not as much as expected, amid a wider slowdown in economic growth as Beijing remains locked in a heated trade dispute with Washington.

However, consumer inflation picked up from June, largely due to a rise in non-food prices, official data showed yesterday.

Last month’s inflation data are the first official reading on the impact on prices from China’s retaliatory tariffs on US$34 billion of US goods that went into effect on July 6 and apply to a range of products from soybeans to mixed nuts and whiskey.

While policymakers are watching price pressures, the People’s Bank of China is likely to give priority to policies that help shore up the slowing economy.

The producer price index (PPI) — a gauge of factory gate inflation — last month rose 4.6 percent from the same period last year, compared with an acceleration to 4.7 percent in June, the Chinese National Bureau of Statistics said.

On a month-on-month basis, the PPI rose 0.1 percent, compared with 0.3 percent growth in June.

Analysts polled by Reuters had expected that producer inflation would edge down to 4.4 percent.

Raw material prices jumped 9.0 percent last month from a year earlier, compared with an 8.8 percent increase in June.

IMPORT GROWTH

Official data on Wednesday showed that China’s import growth last month accelerated to its fastest since January, although the outlook for inbound shipments is clouded by the yuan’s sharp drop over the past few months.

While the tit-for-tat tariffs between China and the US have fueled worries about the inflation outlook, many analysts believe that the impact on consumer prices will be limited.

US President Donald Trump’s administration tightened pressure for trade concessions from Beijing last week by proposing a higher 25 percent tariff on US$200 billion of Chinese imports.

China in turn retaliated by proposing tariffs on US$60 billion of US goods, ranging from liquefied natural gas, iron ore and steel to aircraft.

Economists expected that the proposed tariffs by China and the yuan’s recent decline could push up import prices, which could in turn drive producer price inflation.

“Inflation is unlikely to become much of concern for policymakers,” Capital Economics wrote in a note this week.

CONSUMER PRICES

The consumer price index rose 2.1 percent from a year earlier, beating expectations of 1.9 percent, which was unchanged from June’s growth, but still within the government’s comfort zone of 3 percent.

On a month-on-month basis, the consumer price index rose 0.3 percent.

The core consumer price index, which strips out volatile food and energy prices, rose 1.9 percent last month, unchanged from June’s pace.

The food price index rose 0.5 percent from a year earlier, after ticking up 0.3 percent in June. Non-food prices rose 2.4 percent, compared with 2.2 percent growth in June.

The IMF said that China’s headline inflation is expected to rise gradually to about 2.5 percent, while PPI would moderate.

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