Investing.com — China’s producer price inflation eased more sharply than expected in July, while consumer inflation also slowed as weaker energy prices and soft domestic demand reduced price pressures, Reuters reported on Sunday, citing official data. <\/p>\n
The producer price index increased 3.5% from a year earlier, according to data from the National Bureau of Statistics. That was down from June’s 4.1% rise and marked the weakest annual increase in three months. <\/p>\n
Economists surveyed by Reuters had expected factory-gate prices to rise 3.8%. <\/p>\n
The moderation came as global energy prices retreated despite the continuing war between the U.S. and Iran. Lower commodity costs reduced price pressure for some manufacturers, though several companies remain exposed to elevated input expenses and sluggish domestic demand. <\/p>\n
China’s economy has continued to show an uneven recovery. Factory production and exports have remained relatively strong, but household spending and demand within the domestic market have been weaker. <\/p>\n
Some upstream industries and high-technology manufacturers have maintained solid profit growth. Companies focused mainly on Chinese consumers have faced tougher conditions as economic momentum slowed during the second quarter. <\/p>\n
Rising input costs combined with limited pricing power could place further pressure on manufacturers’ profit margins and business confidence. <\/p>\n
“Consumer and producer inflation weakened in July,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. He added that the figures were consistent with other economic indicators, including a larger-than-expected decline in China’s purchasing managers’ index. <\/p>\n
Chinese leaders have pledged to support growth by accelerating fiscal spending on infrastructure projects that were already included in the budget. <\/p>\n
“The Politburo in July signalled stronger fiscal spending as the policy response,” Zhang said, cautioning that it would take time for the increased expenditure to feed through to economic activity. <\/p>\n
The latest inflation readings may reinforce expectations that Beijing will maintain policy support through the remainder of the year as it seeks to strengthen domestic demand. <\/p>\n
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