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China Factory Inflation Holds Up as Consumer Prices Gain

China’s factory inflation held up in July even as commodity prices eased, and consumer prices gained slightly more than expected.

The producer price index rose 4.6 percent from a year earlier, compared with a projected 4.5 percent increase in a Bloomberg survey of economists and a 4.7 percent gain in June. The consumer price index climbed 2.1 percent, the statistics bureau said Thursday, versus the forecast 2 percent rise.

Policy makers’ vows to boost infrastructure investment amid a slowing economy may underpin domestic demand and counter the external risks posed by the tariff wars. Factory-gate prices so far this year have been defying expectations that they’ll ease to about half the pace of 2017.

Consumer price gains remain well below the central bank’s preferred ceiling of 3 percent, indicating few policy challenges on that front in the near future. The consumer price index excluding food and energy increased by 1.9 percent from a year earlier for the third month in a row.

“Inflation is not a top priority for China’s central bankers now,” said David Qu, an economist at Australia & New Zealand Banking Group Ltd. in Shanghai. Qu estimated CPI will edge up and remain in the 2 to 3 percent range for the rest of the year, under the government ceiling, while PPI holds up on oil prices. “The trade war may lift consumer prices, while its impact on the PPI will probably remain neutral,” Qu said.
Source: Bloomberg

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