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Stability sign as CPI slows and PPI narrows
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CHINA’S consumer price inflation slowed for a fourth straight month in August, helped by weaker food costs, while factory-gate deflation continued to narrow, adding to signs of stabilization in the world’s second largest economy, official data showed yesterday.
The Consumer Price Index, the main gauge of inflation, grew 1.3 percent from a year earlier in August, slowing from 1.8 percent in July and 1.9 percent in June, the National Bureau of Statistics said yesterday.
The CPI pace was the slowest since October 2015 and remained below China’s official target of around 3 percent this year.
Yu Qiumei, a bureau statistician, attributed the lower CPI to decelerating food prices and a higher calculation base during the same period of last year.
Food prices rose 1.3 percent from a year earlier in August, lower than the 3.3-percent gain in July, data showed.
Specifically, pork prices grew 6.4 percent last month, down from a 16.1-percent rise in July, while egg prices fell more quickly to 7.4 percent last month from 2 percent in July. Prices of fruits slid 0.6 percent, reversing from a gain of 0.5 percent in July.
Meanwhile non-food prices rose 1.4 percent in August, flat from July, as increase in the costs of health care and house rent offset a decline in gasoline prices.
Although the weaker consumer inflation offers more room for policymakers to loosen monetary policy, analysts said yesterday’s data are unlikely to affect the policy stance of China’s central bank, which has not adjusted interest rates since October 2015.
“Senior officials have been reiterating the priority of ‘supply-side structural reform’ and the role of active fiscal policy against the backdrop of capacity reduction and an overheating housing market, the possibility for further monetary easing has significantly declined, ” the Australia and New Zealand Banking Group said in a note.
Ren Zeping, economist at Founder Securities, agreed that China is to maintain a neutral monetary policy stance as a potential rebound of inflation in the fourth quarter, concern of asset bubble and a possible interest rate hike by the US Federal Reserve restrain further monetary easing.
Separately, the Producer Price Index, a measurement of inflation at the factory gate and an indication of future prices at the consumer end, added 0.2 percent monthly.
On an annual basis, the PPI fell 0.8 percent, the 54th consecutive month of decline. But its decline narrowed from the drop of 1.7 percent in July and 2.6 percent in June.
ANZ said the improvement in PPI was driven by a recovery in raw material prices and mirrored a rebound in industrial profitability.
“With the improvement in the PPI over the past few months, we have seen industrial corporate profits rising by 11 percent in July, compared with 5.1 percent in June,” ANZ said.
“However, we expect state-owned enterprises engaged in heavy industries to be the main beneficiaries, so the impact will not be evenly distributed,” the bank added.
But the improving PPI data sparked hopes that more than four years of factory price deflation may end. ANZ estimated PPI to turn positive before the end of 2016.
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