Pro­ducer price fall bodes well for China

The Myanmar Times - - Business | International -

CHINA’S pro­ducer prices fell at their slow­est rate for more than four years in Au­gust, an­other sign of sta­bil­i­sa­tion in the world’s sec­ond-largest econ­omy.

The news came a day af­ter Bei­jing un­veiled a fore­cast-beat­ing rise in im­ports – the first in two years – rais­ing hopes that a long pe­riod of slow­ing growth could be bot­tom­ing out.

The pro­ducer price in­dex (PPI), which mea­sures the cost of goods at the factory gate, fell 0.8 per­cent in Au­gust, the Na­tional Bureau of Sta­tis­tics said.

It was the small­est fall since April 2012 and sig­nif­i­cantly nar­rower than July’s 1.7pc de­cline.

Pro­tracted drops in PPI bode ill for in­dus­trial prospects and eco­nomic growth, as they put off cus­tomers – who seek to de­lay pur­chases in an­tic­i­pa­tion of cheaper deals in fu­ture – starv­ing com­pa­nies of busi­ness.

Chi­nese PPI has been neg­a­tive for more than four years but nar­row­ing declines in the past three months have fu­elled hopes for the coun­try – a key driver of the world econ­omy.

China’s econ­omy 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 from re­liance on ex­ports and fixed-as­set in­vest­ment to­wards one driven by con­sumers.

Last month’s PPI drop was less than the 0.9pc de­cline fore­cast by econ­o­mists.

“It shouldn’t be long be­fore headline pro­ducer price in­fla­tion is back in pos­i­tive ter­ri­tory,” said Ju­lian Evans-Pritchard of Cap­i­tal Eco­nom­ics.

ANZ Re­search an­a­lysts ex­pected that shift to pos­i­tive would oc­cur be­fore the end of the year, but pre­dicted that China’s gen­eral price level would none­the­less re­main sta­ble.

“The up­ward pres­sure will not be strong ei­ther given the lin­ger­ing over­ca­pac­ity is­sue,” they said.

But con­sumer in­fla­tion eased to 1.3pc in Au­gust, the NBS said, mark­ing its low­est level since Oc­to­ber.

The fig­ure was down heav­ily from July’s 1.8pc and lower than es­ti­mates of a 1.7pc rise.

Even so Mr Evans-Pritchard said, “We aren’t par­tic­u­larly concerned by the de­cline as it was en­tirely due to more sub­dued food price in­fla­tion.”

Vegetable price rises rose fol­low­ing the worst sum­mer flood­ing in decades, but were off­set by a sharp fall in pork price in­fla­tion.

An­a­lysts agreed that the Au­gust data was un­likely to in­crease the like­li­hood of fur­ther mon­e­tary eas­ing by the cen­tral Peo­ple’s Bank.

“It is con­cerns over credit risks that is keep­ing the PBoC on hold,” Mr Evans-Pritchard said.

Photo: AFP

Chi­nese cus­tomers se­lect goods at a su­per­mar­ket in Qing­dao, east China’s Shan­dong prov­ince, on Septem­ber 9.

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