Home ›› 11 Aug 2022 ›› Asia Biz
China’s factory-gate inflation eased to a 17-month low in July, defying global cost pressures as slower domestic construction weighed on raw material demand, although consumer price increases hit a two-year high as pork supplies tightened.
The producer price index (PPI) rose 4.2per cent year-on-year, the National Bureau of Statistics (NBS) said on Wednesday, compared with a 6.1per cent uptick in June and a median analyst forecast for a 4.8per cent increase.
China’s producer price growth has slowed from a 26-year high hit in October last year, giving policymakers some leeway to stimulate the flagging economy even as central banks elsewhere scramble to hose down rampant inflation with aggressive interest rate hikes.
The consumer price index (CPI) increased 2.7per cent from a year earlier, the fastest pace since July 2020 but below forecasts for a 2.9per cent gain.
The government has set an annual consumer inflation target of around 3per cent, while Premier Li Keqiang said last month China would be able to keep the 2022 price rise under 3.5per cent, in a bid to highlight the need to stabilise prices and employment.
“If we can keep the unemployment rate below 5.5per cent and the CPI rise stays under 3.5per cent for the whole year, we can live with a growth rate that is slightly higher or lower than the target, not too low of course,” said Li in a discussion with business leaders hosted by the World Economic Forum.
While China’s relatively benign inflation has largely been due to weak domestic demand, a moderation in global price pressures, such as falling oil prices, also contributed to July’s slowdown.
“Factory gate inflation will remain on a downward trajectory throughout the rest of the year amid a further drop in commodity prices, easing supply bottlenecks and a higher base for comparison,” Zichun Huang, China economist at Capital Economics, said in a research note.
In a sign of the slowing momentum, PPI fell 1.3per cent month-on-month, its first monthly decline since January, with the biggest falls in the price of metals and petrochemicals.
In annual terms, coal mining and washing industry prices rose 20.7per cent, slowing 10.7 percentage points from June, while the oil and gas extraction industry jumped 43.9per cent, down 10.5 percentage points, according to a separate statement from NBS.
Eventual fall
Input prices slumped in July, China’s official purchasing managers’ index showed last week, due to a decline in energy and raw material costs and pointing to an eventual fall in producer prices. read more
The world’s second-biggest economy has slowed considerably and narrowly escaped a contraction in the June quarter, weighed by strict Covid-19 controls, a distressed property market and cautious consumer sentiment.
Analysts at ANZ expect consumer prices to rise further in the coming months and peak at about 4per cent in September, but the full-year inflation could be at 2.4per cent. In July, the main driver of consumer prices is food inflation, which rose 6.3per cent year-on-year, speeding up from a 2.9per cent uptick in June.
