China factory inflation rises on commodity prices

BEIJINGChina’s factory inflation accelerated in June as the price of commodities held up.

The producer price index (PPI) rose 4.7% from a year earlier, compared to a projected 4.5% increase in a Bloomberg survey of economists and a 4.1% gain in May. The consumer price index (CPI) climbed 1.9% in June, the statistics bureau said yesterday, matching the forecast.

The rebound in producer prices is unlikely to be sustained, as factory momentum weakens amid uncertain global demand and slower domestic credit expansion. The producer price gauge is forecast to ease to a 3.2% gain this year from the 6.3% increase last year that helped support global reflation.

“Consumer price inflation just a tick higher in June and well within the government’s comfort zone means the central bank has some room for maneuver,” according to Fielding Chen at Bloomberg Economics. “Policies have already started tilting toward a pro-growth stance to offset trade war risks and headwinds from deleveraging.”

“Prices of major industrial goods edged up and the yearago basis was low, which boosted a further improvement in producer inflation,” Wang Jian, an economist at Shenwan Hongyuan Securities Co Ltd, wrote in a recent note. “But June is probably the peak of the PPI rebound.”

Base effects from last year were the major reason for the rise of both the PPI and CPI, according to a statement by the National Bureau of Statistics on its website. — Bloomberg