China's Factory Inflation Hits A 17-Month Low, Consumer Prices Speed Up

• China's factory-gate inflation eased in July to a 17-month low, defying global cost pressures as slower domestic construction weighed on raw material demand, although consumer price increases hit a two-year high as pork supplies tightened.
• The producer price index (PPI) rose 4.2% year-on-year, the National Bureau of Statistics (NBS) said on Wednesday, August 31, 2022, versus an uptick of 6.1% in June and analysts' median forecast of 4.8%.
• China's producer price growth has slowed from a 26-year high in October last year, giving policymakers some leeway to stimulate the flagging economy even as central banks elsewhere scramble to hose down rampant inflation with aggressive interest rate hikes.
• The consumer price index (CPI) increased 2.7% from a year earlier, the fastest pace since July 2020, but below forecasts for a gain of 2.9%. The government has set an annual consumer inflation target of about 3%, while Premier Li Keqiang said last month China would be able to keep the 2022 price rise under 3.5%, in a bid to highlight the need to stabilise prices and employment.
• While China's relatively benign inflation has largely been due to weak domestic demand, a moderation in global price pressures, such as falling oil prices, also contributed to July's slowdown. “Factory gate inflation will remain on a downward trajectory throughout the rest of the year amid a further drop in commodity prices, easing supply bottlenecks and a higher base for comparison," Zichun Huang, China economist at Capital Economics, said in a research note.

(Source: Reuters)