ZCZC
BCN-01
CHINA-ECONOMY-INFLATION
China’s factory prices fall faster as weak demand hits economy
BEIJING, Sept 10, 2019 (BSS/AFP) – The prices Chinese firms pay factories
for their goods fell last month at the fastest pace in three years, official
data showed Tuesday, as slackening demand and the bruising US trade war drag
on the economy.
Consumer prices were also broadly subdued and only supported by a surge of
almost 50 percent in the price of pork caused by African swine fever that has
ravaged the country’s pig industry.
The producer price index (PPI) — an important barometer of the industrial
sector that measures the cost of goods at the factory gate — dropped 0.8
percent on-year in August, following a 0.3 percent drop in July.
A slowdown in factory gate inflation reflects sluggish demand, while a
turn to deflation could dent corporate profits and drag on the world’s number
two economy, which in turn could lead to a drop in prices globally.
While the figure from the National Bureau of Statistics (NBS) marked the
second consecutive month of decline, it was slightly better than the 0.9
percent fall forecast in a Bloomberg News survey.
Last month was the first time the PPI had fallen into negative territory
since August 2016.
Petroleum and natural gas mining, and coal and other fuel-processing
sectors led the drop, NBS official Shen Yun said in a statement, indicating
weakness in manufacturing.
However, consumer price index (CPI) — a gauge of retail inflation — rose
2.8 percent last month, stabilising from July and beating forecasts.
But while meat and egg prices rose as traditional Chinese mid-autumn
festival approaches, pork was the key driver, shooting up 46.7 percent on-
year owing to a shortage in supply of the staple, Shen said.
The country’s pig industry has taken a heavy hit from a mass outbreak of
African swine fever that has seen huge amounts of the animals culled in
recent months, causing China to begin relying on imports.
Julian Evans-Pritchard of Capital Economics said that further easing
measures are likely as pressure in demand and factory-gate deflation deepens.
“Weakening demand dragged producer price inflation further into negative
territory last month while surging pork prices kept consumer price inflation
elevated,” he said in a note.
“With demand-side pressures on prices increasingly subdued, we think that
further monetary easing is on the horizon.”
The People’s Bank of China on Friday said it would cut the amount of cash
lenders must keep in reserve saying it would help release more than $100
billion into the stuttering economy.
China also confirmed last week a new round of trade talks will be held in
Washington in early October, in an attempt to patch up the trade tensions
between the world’s two biggest economies.
BSS/AFP/FI/1157 hrs