Obstruction (Reuters) – China’s factory deflation eased in July, driven by rising global oil prices and as industrial activity climbed back to pre-coronavirus levels, adding signs of recovery in the second-largest economy in world.
PHOTO FILE: A worker is seen on a hot production line rolling at the Chongqing Iron and Steel Plant in Changshou, Chongqing, China August 6, 2018. REUTERS / Damir Sagolj
The Producer Price Index (PPI) fell 2.4% from a year earlier in July, the National Bureau of Statistics (NBS) said in a statement Monday, compared to a 2.5% drop included in a survey of analysts at Reuters and a decrease of 3.0% in June.
Analysts say China’s industrial output is steadily returning to pre-pandemic levels before paralyzing much of the economy as demand for growth, government stimulus and surprisingly resilient exports push for a recovery.
Future prices of iron ore in Dalian have reached around 50% so far this year while prices of steel rods used in construction have risen 12%.[IRONORE/]
Oil and natural gas extraction prices pushed key gains, rising 12% month after month, thanks to the continued rise in global crude oil prices, according to Dong Lijuan, an old NBS statistic. Coal mining and vehicle production prices also returned positive in July.
“A further increase in fiscal stimulus should continue to increase infrastructure spending in the coming months, supporting a further recovery of economic activity and producer prices,” said Julian Evans-Pritchard, China’s chief economist at Capital Economy .
However, PPI rose 0.4% on a monthly basis, unchanged from growth in June, indicating tensions in construction and manufacturing performance caused by recent floods in southern China. Some economists have warned that the recovery could stall between prudent consumer spending and a resurgence in global infections.
Consumer inflation rose in July as bad weather pushed higher food prices.
The Consumer Price Index (CPI) rose 2.7% from a year earlier, its fastest pace in three months, and was compared to an expected 2.6% increase and a 2.5% increase in June.
It was mainly driven by rising pork prices, which rose 85.7% year-on-year.
However, core inflation, which excludes food and energy costs, rose by only 0.5% in July from a year earlier.
“The higher-than-expected price increase will strengthen the monetary authorities’ determination to normalize policies,” said Hu Yuexiao, chief macro analyst at Shanghai Securities.
Reporting by Yawen Chen and Se Young Lee; Edited by Sam Holmes