China factory inflation decline halted as consumer prices ease
Five-month streak of declines pauses and consumer price index rises but marginally below forecasts
China’s factory inflation has gained pace, snapping a five-month streak of declines, while the consumer price index eased.
The producer price index (PPI) rose 3.4 per cent in April from a year earlier, in line with the estimate in a Bloomberg survey and up from 3.1 per cent in March.
The consumer price index climbed 1.8 per cent, the statistics bureau said on Thursday, versus a forecast 1.9 per cent gain and a prior reading of 2.1 per cent.
Producer inflation pressures remain broadly on an easing trend since reaching an eight-year high in February 2017. In recent months solid external demand has helped to underpin the economic expansion even as the trade tensions with the US add uncertainty to the outlook.
“Inflation remains well-behaved,” said Dariusz Kowalczyk, senior emerging market strategist at Credit Agricole SA, in a Bloomberg Television interview.
“This means that monetary policy will remain steady. Benchmark rates will not be changed this year and rates used in open-market operations will be moved only marginally higher in lockstep with the Fed in terms of timing but by much smaller increments.”
“Our view remains that inflation will stay subdued for the year, reflecting slower growth and ebbing upstream price pressure,” Bloomberg economists Tom Orlik and Fielding Chen wrote in a report.
“The impact of the recent surge in oil prices will be muted by the relatively low share of oil in China’s energy mix, and the potential for controls on retail gasoline prices.”
Despite a PPI acceleration from a year earlier influenced by a low base, factory prices fell from a month earlier, signalling that a turning point for the moderation in the headline index may not have been reached just yet.
“Inflation pressure will pick up in the coming months, but won’t rise to the level that would affect monetary policy,” said Zhu Qibing, chief macro-economy analyst at BOC International China in Beijing.
“PPI may continue to rebound on supply-side reforms and pollution curbs.”
A gauge of raw materials producer prices picked up to 5.7 per cent from 5.1 per cent, while indexes for manufacturing and mining also gained.
Consumer inflation for food slowed to 0.7 per cent from 2.1 per cent. A gauge for consumer goods edged lower.