China Factory Prices Fail To Rise For First Time In 3 Years
10 Juli 2019 - 10:32AM
RTTF2
China's factory prices in June were unchanged from a year ago
after an almost three-year long sequence of increases, raising
concerns of a return of deflation in the industrial sector.
Meanwhile, consumer price inflation was steady despite a further
rise in pork prices, and economists expect price growth pressures
to remain subdued in future thus allowing the Peoples Bank of China
to add more stimulus to support the economy. Producer prices were
flat year-on-year in June, which was the weakest outcome since
August 2016, when they fell, data from the National Bureau of
Statistics showed Wednesday. Factory prices had risen 0.6 percent
in May and economists were looking for a 0.2 percent increase for
June. Compared to the previous month, producer prices fell 0.3
percent in June after a 0.2 percent rise in May. The consumer price
inflation was 2.7 percent in June, same as in May, and the highest
in 15 months. The outcome was in line with economists'
expectations. Food prices rose 8.3 percent, driven by a 42.7
percent jump in fresh fruit prices due to bad weather. Meat prices
were up 14.4 percent, led by the price of pork that surged 21.1
percent due to tight supply caused by the outbreak of the African
swine fever. Non-food prices increased 1.4 percent. Transport and
communication costs dropped 1.9 percent, mainly driven by a sharp
drop in prices of vehicle fuels. Core inflation, which excludes
volatile food and energy prices, was 1.6 percent in June, same as
in May. On a month-on-month basis, the consumer price index
decreased 0.1 percent in June after remaining unchanged in May.
Pork prices rose 3.6 percent from the previous month. Lower oil
prices also helped to keep overall inflationary pressures subdued
in June, economists said. "Given subdued demand and an absence of
price pressures at the factory gate, underlying consumer price
inflation might seem likely to ease further in the second half of
the year giving the PBoC scope for further stimulus if it sees
fit," economists at Daiwa Capital Markets said. The latest
stabilization in consumer prices inflation is likely to be
short-lived, Capital Economics said. "The drag from falling oil
prices should ease before long and the recent collapse in pig
supply suggests that upward pressure on food prices is likely to
intensify in the coming months," Capital Economics economists
Julian Evans-Pritchard and Martin Rasmussen said. "However, given
that supply disruptions will be mostly to blame, we don't think
that a further rise in headline inflation will prevent the People's
Bank from loosening monetary policy."
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