The FINANCIAL — China’s consumer inflation quickened in August, but economists said the pickup likely wasn’t enough to makepolicy makers pull back from monetary easing amid continued signs of sluggishness in the world’s second-largest economy, according to Nasdaq.
China’s consumer-price index rose 2.0% in August from a year earlier, quicker than a 1.6% year-over-year rise in July, the National Bureau of Statistics said on September 10. The rise in the key inflation gauge exceeded the median 1.9% gain forecast by 12 economists in a survey by The Wall Street Journa. The increase in the consumer-price index was still well within the government’s annual target, and continued declines in factory-gate prices will help persuade Beijing to keep its monetary policy more accommodative.
“Despite the pickup, the CPI figure still is not a threat for Beijing to change its policy stance, especially when factory-gate prices remain in the deflationary territory. China’s central bank is expected to keep easing its monetary policy throughout the year,” said Fan Zhang, an economist with RHB Research said.
The pickup in the consumer inflationary rate was mainly due to a recent increase in pork prices which jumped 19.6% from a year ago, the statistics bureau said.
A sharp drop in pig numbers in recent months will continue put upward pressure on pork-price inflation and consumer prices will continue to rise in the coming quarters, said Julian Evans-Pritchard, an economist with Capital Economics.
China’s producer-price index dropped 5.9% in August from a year earlier, worsening from a 5.4% year-over-year drop in July. The fall in the gauge of factory-gate prices was worse than economists’ median forecast of a 5.6% decline.
Mr. Zhang said given the falling PPI figures and still weak economic fundamentals in the third quarter, Beijing needs to do more on the fiscal front. Additional tax breaks and more spending by the central government while the local governments are struggling with a buildup of debt, will be welcome and provide more support to the slowing economy, said Mr. Zhang.
China’s economic growth came in at 7% year-over-year in the second quarter—matching the first-quarter level, which was the slowest pace in six years. Economic data, including a gauge of manufacturing activity as well as imports and exports all came in weak in August, sparking concerns that China might miss its target of about 7% economic growth this year.
To shore up the economy, China’s central bank has cut benchmark interest rates five times since November and injected funds into the banking system to help increase lending. The government has also accelerated spending on infrastructure projects, offered more tax breaks to businesses and allowed local governments to issue more debt in a bid to help boost their spending.
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