China con­sumer in­fla­tion rises to 1.6% in July: gov’t

The China Post - - BUSINESS -

Con­sumer in­fla­tion in main­land China rose to 1.6 per­cent in July, the gov­ern­ment said Sun­day, as down­ward pres­sure on prices eased fur­ther in the world’s sec­ond-largest econ­omy.

The read­ing for the con­sumer price in­dex (CPI), a main gauge of in­fla­tion re­leased by the Na­tional Bureau of Sta­tis­tics (NBS), was higher than June’s 1.4 per­cent.

Mod­er­ate in­fla­tion can be a boon to con­sump­tion as it pushes con­sumers to buy be­fore prices go up, while fall­ing prices en­cour­age shop­pers to de­lay pur­chases and com­pa­nies to put off in­vest­ment, both of which can hurt eco­nomic growth.

Slow­ing eco­nomic growth and declines in com­mod­ity prices have helped keep main­land China’s con­sumer in­fla­tion in check, with some an­a­lysts rais­ing the prospect of loom­ing de­fla­tion given weak­ness in other price yard­sticks.

The pro­ducer price in­dex — a mea­sure of costs for goods at the fac­tory gate and a lead­ing in­di­ca­tor of the trend for CPI — de­clined 5.4 per­cent in July, the NBS said, com­pared with a 4.8 per­cent re­treat in June, and mark­ing the 41st con­sec­u­tive monthly fall.

The CPI fig­ure com­pared with the me­dian es­ti­mate of 1.5 per­cent in a sur­vey of econ­o­mists by Bloomberg News.

In July, food prices, nor­mally the key driver for main­land Chi­nese in­fla­tion, rose 0.7 per­cent year-on-year, the NBS said.

The sur­vey col­lects prices from more than 63,000 out­lets in­clud­ing gro­cery stores, su­per­mar­kets, shop­ping malls and agri­cul­tural trade mar­kets across 500 cities and coun­ties in the coun­try, the NBS says.

CPI touched 0.8 per­cent in Jan­uary — its low­est in more than five years — but re­bounded to 1.5 per­cent in April.

Main­land China’s eco­nomic growth hit a 24-year low last year, ex­pand­ing 7.4 per­cent amid a steady slow­down from years of dou­ble-digit ex­pan­sions.

Growth in gross do­mes­tic prod­uct (GDP) has slowed fur­ther this year, ex­pand­ing 7.0 per­cent in each of the first two quar­ters.

While author­i­ties say that weaker growth is welcome as it fits in with their plan to shift the coun­try’s eco­nomic model away from in­vest­ment and to­wards con­sumer spend­ing, they are on guard that ex­pan­sion does not de­cel­er­ate too sharply.

The cen­tral Peo­ple’s Bank of China (PBOC) has cut bench­mark in­ter­est rates four times since Novem­ber and has also loos­ened re­quire­ments for how much cash banks must keep on their books in a bid to boost lend­ing and stim­u­late growth.

The PBOC has also seen the mea­sures as tools to fight de­fla­tion risks.

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