China consumer inflation falls short of expectations

China consumer inflation falls short of expectations

International News

China’s consumer price index rose 1.4 percent in July from a year ago, missing estimates, the National Bureau of Statistics said Wednesday. Meanwhile, China’s producer price index rose 5.5 percent in July from a year ago. Analysts polled by Reuters expected consumer inflation to stay steady from June at 1.5 percent on-year while producer prices were also forecast to remain flat from the 5.5 percent on-year rise in June. Capital Economics China Economist Julian Evans-Pritchard said the inflation data point to cooling price pressures. Producer price inflation held steady for the third straight month and was positive on a month-on-month basis for the first time since March, but “this appears to be almost entirely due to the recent rally in domestic steel prices, which is unlikely to be sustained in our view,” he added. ANZ’s markets economist David Qu, however, said PPI is likely to remain strong in the coming months as the Chinese government continues to reduce over-capacity, a move that will support commodity prices. The Chinese government has been tightening monetary policy to reign in debt. “The upshot is that with policy tightening now weighing on economic activity, underlying inflation has already begun to decline. With growth likely to slow further in the coming quarters, we think the pick-up in price pressures witnessed during the past year will continue to unwind,” said Evans-Pritchard.