Producer price fall bodes well for China
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.
Chinese customers select goods at a supermarket in Qingdao, east China’s Shandong province, on September 9.