China June producer inflation accelerates to six-month high
Few signs of import tariffs on US goods hitting consumers
BEIJING, July 10, (RTRS): China’s producer inflation accelerated to a sixmonth high in June, lifted by strong commodity prices and threatening to put more pressure on the country’s exporters as a trade war escalates between Washington and Beijing.
Annual consumer inflation also edged up as food prices rose at a faster pace, official data showed on Tuesday. But retail price pressures remain modest, allowing the central bank to remain more focused on ways to support the slowing economy.
The United States and China slapped tariffs on $34 billion worth of each others’ goods last week, fuelling fears of a prolonged battle that would hurt global investment and growth, damage US farm exports and potentially drive up food prices in China.
The producer price index (PPI) — a gauge of industrial profitability — rose by a stronger-than-expected 4.7 percent in June from a year earlier, compared with a 4.1 percent increase in May, according to the National Bureau of Statistics (NBS).
China’s producer inflation has now picked up for three months in a row after easing in late 2017, though monthon-month growth dipped to 0.3 percent in June.
Analysts polled by Reuters had expected June producer inflation would pick up to 4.5 percent, buoyed by a recent recovery in global commodity prices.
June’s price gains were driven by increases in oil and gas production, coal mining, metals and chemicals processing and manufacturing sectors.
With oil prices up, China on Monday raised retail gasoline prices by the most since December 2016.
The higher prices have helped fuel a jump in earnings, with profits at China’s industrial firms growing at a sizzling pace in May, but some analysts say the latest gains would have less of an impact on profits.
“Unlike the broad based pick-up in PPI last year, the recent rebound has been more narrowly driven by oil prices and so is less supportive of corporate profits,” Julian Evans-Pritchard, Senior China Economist at Capital Economics, wrote in a note.
The jump in prices of resources such as oil and steel has benefitted producers but raised input costs for manufacturers like exporters which are further
along supply chains. Business surveys show Chinese manufacturers are already reporting softer export orders as the trade row deepens.
There are few signs in official data that tariff jitters are percolating
through to most Chinese consumers just yet.
The consumer price index (CPI) rose 1.9 percent in June from a year earlier, in line with expectations for a slight pick-up from May’s gain of 1.8 percent.
On a month-on-month basis, the CPI fell 0.1 percent.
The core consumer price index, which strips out volatile food and energy prices, was unchanged at 1.9 percent in June.