Pos­i­tive data may in­di­cate im­prov­ing econ­omy

The Myanmar Times - - International Business -

CHINA’S pro­ducer de­fla­tion eased to its slow­est de­cline in nearly two years in July, the Na­tional Bureau of Sta­tis­tics (NBS) said yes­ter­day, a pos­i­tive sign of im­prov­ing con­di­tions for the world’s sec­ond-largest econ­omy.

The pro­ducer price in­dex (PPI), which mea­sures the cost of goods at the fac­tory gate, fell 1.7 per­cent year-onyear last month, less than the 2pc de­cline es­ti­mated by econ­o­mists in a poll by Bloomberg News and sig­nif­i­cantly nar­rower than the 2.6pc fall in June, as a re­bound in some com­mod­ity prices re­duced de­fla­tion­ary pres­sure.

Pro­tracted de­clines in PPI bode ill for in­dus­trial prospects as they put off cus­tomers who seek to de­lay pur­chases in an­tic­i­pa­tion of lower prices in fu­ture, starv­ing com­pa­nies of busi­ness and funds. Chi­nese PPI has been neg­a­tive for more than four years but nar­row­ing de­clines in the past three months have fu­elled hopes the world’s sec­ond-largest econ­omy could be reach­ing the bot­tom of a painful slow­down.

The im­prove­ment in PPI “should ben­e­fit the cor­po­rate sec­tor’s prof­itabil­ity” re­searchers with ANZ said in a note, but added that it will mainly help state-owned en­ter­prises, which dom­i­nate heavy in­dus­try, so that the im­pact on pri­vate sec­tor in­vest­ment will be lim­ited.

Pro­ducer price in­fla­tion should con­tinue to strengthen and will “turn pos­i­tive” in the sec­ond half of 2016 as com­mod­ity prices sta­bilise, they said.

But they warned that un­til Bei­jing’s plans to cut coal and steel ca­pac­ity have “made sig­nif­i­cant progress, the PPI should not stay strong”.

China’s GDP ex­panded last year at its slow­est rate in a quar­ter of a cen­tury as Bei­jing strives to ef­fect a dif­fi­cult tran­si­tion in its growth model away from re­liance on ex­ports and fixed-as­set in­vest­ment to­wards one driven by con­sumers.

Con­sumer in­fla­tion eased slightly in July. The con­sumer price in­dex (CPI) – a main gauge of in­fla­tion – rose 1.8pc on-year, the NBS said, lower than June’s 1.9pc rise but match­ing ex­pec­ta­tions in a Bloomberg sur­vey.

“The heavy rain had a rather big im­pact on veg­etable prices,” NBS an­a­lyst Yu Qi­umei said in a separate state­ment, adding that prices in An­hui, Hubei, He­bei and Bei­jing in­creased 16.2pc, 14.3pc, 13.3pc and 12.8pc re­spec­tively mon­thon-month.

“The sum­mer hol­i­day fu­elled the sea­sonal in­creases in prices of some ser­vices,” Ms Yu said. Air ticket prices and tourism agency charges rose 12.1pc and 6.5pc re­spec­tively month-on-month.

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