China inflation subdued, leaving room for stimulus
Statistics bureau says consumer price index rose 2.6 per cent last month, in line with expectations
Consumer inflation on the mainland stayed below target for an eighth month, while factory-gate prices fell by the least in six months, reflecting an economic pick-up that leaves room for officials to add stimulus if needed.
The consumer price index rose 2.6 per cent last month, the National Bureau of Statistics said yesterday, matching the median forecast of a survey. The producer price index (PPI) dropped 1.6 per cent, the 18th straight decline, after a 2.3 per cent decrease in July.
Subdued consumer inflation gives Premier Li Keqiang more room to support growth should this quarter's rebound, signalled by faster gains in exports and industrial production, prove temporary. The country's leaders have indicated they will defend this year's 7.5 per cent expansion target without seeking to return to the pace of previous years.
"China's consumer inflation will be fairly stable in the coming months, and it won't become a major issue for policymakers," said Steve Wang, chief China economist with Reorient Financial Markets, before the release.
"China's PPI may return to positive territory by the end of this year thanks to improving demand in various industries from steel to shipping."
Customs data on Sunday showed exports rose a more-than-estimated 7.2 per cent last month, while imports trailed forecasts with a gain of 7 per cent. The statistics bureau is scheduled to publish data today on industrial production in August, which may have risen 9.9 per cent, the most this year excluding months distorted by the Lunar New Year holiday. The People's Bank of China is due to report figures on credit and money supply by September 15.
While emerging markets from India to Indonesia are suffering from capital flight and growth slowdowns, the mainland's official manufacturing purchasing managers index jumped to a 16-month high last month, and a separate PMI released by HSBC and Markit Economics showed the largest gain since 2010.
Policymakers seek to keep consumer inflation within about 3.5 per cent this year.
Meanwhile, the central government might cut next year's growth target for the mainland economy to 7 per cent, although the actual pace of expansion would be higher, Fan Jianping, chief economist at a research institute under the National Development and Reform Commission, said on the weekend.