China Inflation Stays Subdued as Producer-Price Drop Eases
China’s consumer inflation stayed below target for an eighth month while factory-gate prices fell by the least in six months, reflecting an economic pickup that leaves room for officials to add stimulus if needed.
The consumer-price index rose 2.6 percent, the National Bureau of Statistics said in a statement today in Beijing, matching the median forecast in a Bloomberg News survey. The producer-price index dropped 1.6 percent in August, the 18th straight decline, after July’s 2.3 percent decrease.
Subdued consumer inflation gives Premier Li Keqiang more room to support growth should this quarter’s rebound, signaled by faster gains in exports and industrial production, prove temporary. China’s leaders have indicated they will defend this year’s 7.5 percent 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 policy makers,” Steve Wang, Hong Kong-based chief China economist with Reorient Financial Markets Ltd., said 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.”
Estimates for consumer inflation from 46 analysts ranged from 2.4 percent to 3 percent. The median projection for the PPI was for a 1.7 percent drop, with forecasts ranging from declines of 1.4 percent to 2.1 percent.
The Shanghai Composite Index rose 1.1 percent at 9:43 a.m. local time following two straight weekly gains of 2 percent.
Customs data yesterday showed exports rose a more-than-estimated 7.2 percent in August while imports trailed forecasts with a gain of 7 percent. The statistics bureau is scheduled to publish data tomorrow on industrial production, which may have risen 9.9 percent in August, the most this year outside of months distorted by the Chinese New Year holiday. The People’s Bank of China is due to report figures on credit and money supply by Sept. 15.
While emerging markets from India to Indonesia are suffering from capital flight and growth slowdowns, China’s official manufacturing Purchasing Managers’ Index jumped to a 16-month high in August and a separate PMI released by HSBC Holdings Plc and Markit Economics showed the largest gain since 2010.
Commerce Minister Gao Hucheng said last week that consumer prices will maintain stable growth and the nation will meet its 2013 inflation goal, according to comments posted on the ministry’s website. Policy makers are seeking to keep the consumer inflation rate within about 3.5 percent this year.
Downward pressure on China’s growth will remain heavy in the coming months, Zhang Junkuo, a deputy head of the Development Research Center under the State Council, said Sept. 5 at a forum in Beijing.
The fastest Chinese steel output on record is still too slow to meet demand from builders, reducing inventories and driving prices toward a bull market. Production of steel reinforcement bars rose 14 percent in the first seven months and stockpiles slumped 35 percent from an all-time high, data compiled by Bloomberg show.
Hebei Iron & Steel Co. (000709), China’s biggest producer, may double profit per share this year, according to the average of four analyst estimates compiled by Bloomberg.
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