China Consumer Inflation Slows for Fourth Straight Month
09 September 2016 - 02:50PM
Dow Jones News
BEIJING—China's consumer inflation slowed in August for a fourth
straight month as prices for many foods fell, giving authorities
more room to ease monetary policy to lift growth.
Prices were up 1.3% from a year earlier, the National Bureau of
Statistics said Friday, slowing from July's 1.8% pace, and
undershooting the median 1.6% gain forecast by 15 economists
surveyed by The Wall Street Journal. It was the lowest level for
the consumer-price index since October 2015.
China's producer-price index declined 0.8% in last month from a
year earlier, largely in line with expectations, compared with a
1.7% drop in July. The index of prices at the factory gate has
lingered in deflationary territory for over four years, though
downward pressure has eased since the beginning of this year.
"In general, it's a nice combination," said Macquarie Group
economist Larry Hu. "CPI is lower, while PPI is falling less
quickly. This gives more room for policy easing and less
[industrial] deflation."
Mr. Hu said Beijing is unlikely to reduce interest rates or cut
required bank reserves immediately for fear of spurring speculation
in the real-estate market and hurt highly leveraged financial
institutions. But the inflation numbers provide more room to act if
the economic slowdown is worse than expected, he added.
China's economy grew by 6.7% in the second quarter, a pace
economists expect it to match for the year. That would be down from
last year's 6.9%, the slowest annual growth rate in a quarter
century. In March Beijing set the target for this year at 6.5% to
7%.
J.P. Morgan Chase & Co. said in a report that ebbing growth
could prompt an interest-rate cut in the fourth quarter. China is
expected to continue spending heavily on infrastructure projects to
bolster the economy, it added.
China benchmark consumer-inflation measure remains well below
Beijing's targeted ceiling of 3% this year. While lower prices help
an economy if consumers and companies use the savings to buy and
invest elsewhere, protracted declines may encourage them to delay
spending to take advantage of still-lower prices in the future.
That drags down growth.
So far, falling price pressure for consumers isn't a huge
concern, but this could change if the index continues to fall, Mr.
Hu said.
Food prices grew only anemically in August, with eggs, fruits
and vegetables all down. Pork prices were up 6.4% from a year
earlier, helping the subindex to maintain an overall increase—but
that compares to pork's 16.1% jump in July.
"It's the hogs again," said Founder Securities Co. economist
Yang Weixiao.
But lower prices can take time to filter down. "Food is becoming
more and more expensive," said Hua Siheng, a 20-something employee
at a state-owned company, who said his wages are stagnant so he's
watching food costs carefully. "I like eating pork, but with the
recent 30% price increase, I'm eating less meat," he added.
Deflationary pressure at the factory gate has eased this year;
August's 0.8% drop in producer prices compared with 5.9% at the end
of 2015. This is largely due to higher commodity prices; between
June and late August, coal and steel prices in China increased by
over 20%. A further easing of producer deflation through the end of
the year is expected to bolster corporate balance sheets and
profitability. Industrial profits in July were up 11% from a year
earlier, accelerating from June's 5.1% increase.
Liyan Qi contributed to this article.
Write to Mark Magnier at mark.magnier@wsj.com
(END) Dow Jones Newswires
September 09, 2016 00:35 ET (04:35 GMT)
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