Beijing (Reuters) -China’s factory-gate inflation dropped to its lowest level in 15 months in June, going against the trend of rising prices around the world.
The National Bureau of Statistics (NBS) said on Saturday that the producer price index (PPI) rose 6.1% year over year. This comes after a 6.4% rise in May. A Reuters poll showed that analysts thought the PPI rate would go up by 6%.
In a separate statement, NBS official Dong Lijuan said that the slower rise in the PPI was caused by the return of more industrial production, stable supply chains in key sectors, and government policies to keep commodity prices stable.
NBS says that producer prices went up the most in the oil and gas extraction industry and went down the most in the oil and gas mining and processing industry.
Zhou Maohua, an analyst at China Everbright (OTC: CHFFF) Bank, said in a note that the falling factory-gate inflation shows that manufacturers in the middle and at the end of the supply chain are feeling less cost pressure.
China’s producer price inflation has been going down for six months in a row. This is very different from the skyrocketing inflation around the world, which has caused major central banks in other parts of the world to raise interest rates.
The consumer inflation rate in the world’s second-largest economy rose by the most in almost two years, but it still stayed within the country’s goal of a rise of about 3%.
The rise in fuel prices led to a rise in consumer inflation, which shows that policymakers will need to keep a close eye on any persistent cost pressures as prices rise around the world.
The consumer price index (CPI) went up 2.5% from a year ago. This was a bigger increase than the 2.1% rise in May and the highest increase in 23 months. A Reuters poll said that the CPI was likely to go up by 2.4%.
After dropping by 0.2% in May, the CPI stayed the same in June, which was better than the 0.1% drop predicted by a Reuters poll.
The NBS said that the price of gas for cars went up by 32.8% in June.
“China will still have to deal with both structural inflation and inflation that comes from other countries.” The slow recovery of domestic demand will also push headline consumer inflation higher, “said Ying Xiwen, a senior analyst at Minsheng Bank.
Overall, the CPI is expected to rise slowly, and it’s very likely that it will go over 3% in the second half of the year. However, Ying said that the average level for the whole year would still be within the annual goal.
In recent months, China’s economy has shown some signs of getting better after a sharp drop caused by COVID lockdowns in many cities, including the commercial hub Shanghai.
But there are still obstacles to growth, like worries about COVID infections coming back in waves. Some places have recently heard about cases getting worse, which could slow or even stop the healing process. [nL4N2YQ00O]
China will issue a 2023 advance quota for local government special bonds in the fourth quarter. Reuters sources say the new quota is likely to be bigger than the 1.46 trillion yuan ($218.09 billion) for 2022.
Governor Yi Gang of the People’s Bank of China (PBOC) promised at the end of June to keep monetary policy easy to help the economy get better.
“Monetary policy is limited by things like the Fed’s aggressive rate hikes and rising worries about inflation, and it seems to be shifting from a crisis mode to a “let’s see” mode. In the future, we think that the PBOC will be careful and base its stimulus on data. In a note, Citi analysts said.
(1 US dollar = 6.6945 Chinese yuan renminbi)
