A man walks past an iron ore mixing site at the port of Dalian, Liaoning province, China September 21, 2018. Picture taken September 21, 2018. REUTERS/Muyu Xu/File Photo

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  • June Year-over-year PPI eases to 15-month low
  • June CPI year-on-year hit a 23-month high

BEIJING, July 9 (Reuters) – China’s factory gate inflation cooled in June to its lowest level in 15 months as the country continues to buck an accelerating global trend prices.

The producer price index (PPI) rose 6.1% year-on-year, the National Bureau of Statistics (NBS) said on Saturday, after rising 6.4% in May. Analysts had expected the PPI rate to rise by 6.0% in a Reuters poll.

The slower rise in the PPI was driven by the resumption of additional industrial production, stable supply chains in key sectors and government policies aimed at stabilizing commodity prices, said Dong Lijuan, chief executive. of the BES, in a separate press release.

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Inflation in the ferrous metal mining and processing industry fell the most, while producer prices in the oil and gas extraction industry rose the most, according to the BES.

Lower factory gate inflation reflects easing cost pressures on midstream and downstream manufacturers, China Everbright Bank analyst Zhou Maohua said in a note.

Producer inflation in China has slowed for six consecutive months. This contrasts sharply with the surge in global inflation that prompted major central banks in the rest of the world to raise interest rates.

The consumer inflation rate in the world’s second largest economy rose to the highest in nearly two years, although it remained within the country’s target of a rise of around 3 %.

The pick-up in consumer inflation follows a surge in fuel prices and suggests that policymakers will need to closely monitor any lingering cost pressures amid the global price spike.

The consumer price index (CPI) rose 2.5% from a year earlier, following a 2.1% gain in May and the highest in 23 months. In a Reuters poll, the CPI is expected to rise 2.4%.

The CPI was flat month on month after falling 0.2% in May, beating a 0.1% decline in a Reuters poll.

Vehicle fuel prices soared 32.8% in June, the BES said.

“China will continue to face the double pressure of structural inflation and imported inflation. The slow recovery of domestic demand will also increase headline consumer inflation,” said Ying Xiwen, senior analyst at the Minsheng Bank.

Overall, the CPI should increase moderately and most likely exceed 3% in the second half of the year, but the average level for the whole year will still be within the annual target, said Yin.

China’s economy has shown signs of recovery in recent months after a sharp COVID-induced decline due to widespread shutdowns in cities, including the Shanghai Mall.

However, headwinds to growth persist, including concerns over any recurring wave of COVID infections. Some regions have recently reported surges in cases, which could slow or even hinder a recovery. [nL4N2YQ00O]

To stimulate the flagging economy, China will issue an advance quota for 2023 for local government special bonds in the fourth quarter, with the new quota likely to exceed 1.46 trillion yuan ($218.09 billion) for 2022, sources told Reuters. Read more

At the end of June, the Governor of the People’s Bank of China (PBOC), Yi Gang, pledged to maintain an accommodative monetary policy to support an economic recovery.

“Monetary policy is facing constraints such as aggressive Fed hikes and rising inflation concerns and appears to be shifting from crisis mode to wait-and-see mode. Looking ahead, we believe the PBOC would be cautious and data-dependent to calibrate its stimulus,” Citi analysts said in a note.

($1 = 6.6945 Chinese yuan renminbi)

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Reporting by Gao Liangping, Ellen Zhang and Ryan Woo; Editing by Christian Schmollinger

Our standards: The Thomson Reuters Trust Principles.

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