China's consumer prices boosted by weather disruptions; domestic demand still soft
9 thg 8, 2024
China's consumer prices rose at a slightly faster-than-expected rate in July partly due to weather disruptions to food supplies, while producer deflation persisted, keeping the country's underlying consumption trends soft in a test for policymakers.
China's frail consumer sector has been a major focus for Beijing as weak domestic demand hobbles the world's second-biggest economy while manufacturing activity shrinks.
The consumer price index (CPI) edged up to a five-month high of 0.5% year-on-year in July, versus a 0.2% rise in June, the National Bureau of Statistics (NBS) reported on Friday, beating a 0.3% increase in a Reuters poll of economists.
On a month-on-month basis, the CPI rose 0.5% against a 0.2% fall in June and a forecast 0.3% increase.
High temperatures and rainfall in some areas last month pushed up food prices, partly contributing to the monthly return to growth, said NBS statistician Dong Lijuan.
Food prices swung from a drop of 2.1% on-year in June to an unchanged outcome in July when they also grew 1.2% month-on-month versus a drop of 0.6% in June.
"There's a sharp contrast between food and ex-food CPI... none of the other goods and services saw inflationary moves, suggesting no sign of a pickup in domestic demand," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Weak domestic demand has become a major pain point for the economy, while hopes for an export-led recovery have also been crimped by rising trade tensions with the West, tariffs on Chinese goods and fears of a U.S. recession.
Core inflation, excluding volatile food and fuel prices, gained 0.4% on-year in July, down from 0.6% in June.
Consumers have largely shunned incentives to revive consumption, as a prolonged housing downturn, job insecurity and a wall of local government debt inhibit them from purchases of especially big-ticket items.
Car sales, the biggest component of China's retail sales, fell for the fourth month running in July despite a national auto trade-in program and eased auto loan rules.
China's capital city Beijing posted a 6.3% slide in retail sales in June while the financial hub of Shanghai saw the gauge of consumption fall 9.4%, underperforming a national rise of 2%.
China's stock benchmark CSI 300 Index, opens new tab rose around 0.4% after the inflation data while consumer staples, opens new tab remained largely flat.
The producer price index (PPI) was down 0.8% in July from a year earlier, the data showed, unchanged from the previous month, and above an expected 0.9% fall.
Chinese leaders pledged at July-end that the stimulus measures needed to reach this year's economic growth goal of around 5% will be targeted at consumers.
Just days before, China announced plans to use 150 billion yuan ($20.9 billion) in government debt to finance trade-ins on consumer goods such as appliances to stimulate spending.
But that effort amounts to just 0.12% of GDP, and analysts say vague promises of "incremental measures" will likely fall short.
At a press conference in Beijing on Friday officials gave few clues to more forceful policies.
"Looking ahead, we expect PPI deflation to lessen gradually, and CPI inflation to remain relatively low in the coming months," Goldman Sachs said in a note.
Source: Reuters
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