China’s June factory price inflation subdued on modest raw materials recovery

Reuters

* China June PPI +5.5 pct y/y (poll +5.5 pct), same as
previous month
    * PPI -0.2 pct m/m in June vs -0.3 pct in May
    * Prices of raw materials make modest recovery
    * But oversupply, weak demand remain problems - analyst
    * China June CPI +1.5 pct y/y (poll +1.5 pct), same as
previous month

 (Adds details, background)
    By Sue-Lin WongBEIJING, July 10 (Reuters) - China's producer price
inflation was unchanged in June and remained well off highs seen
earlier this year, amid lingering oversupply issues in the steel
sector and as signs of economic weakness weighed on the outlook
for prices.
    The producer price index (PPI) rose 5.5 percent in June from
a year earlier, the National Bureau of Statistics (NBS) said on
Monday. This was in line with analyst forecasts and unchanged
from the previous month.
   Prices of raw materials are making a modest recovery, helped
by stronger futures prices in China over the past few weeks,
after an earlier hit taken from a broader cooling in economic
activity since March.
    China's June consumer prices rose 1.5 percent from a year
earlier, in line with market expectations and May's reading, the
NBS said, with food prices continuing their declines albeit at a
slower pace.
    There are some concerns among analysts that price pressures
could weaken throughout the rest of the year as economic
fundamentals soften.
    "The upshot is that, having eased in previous months, price
pressures appear to have stabilised in June," Julian
Evans-Pritchard from Capital Economics in Singapore wrote in a
note.
    "Nonetheless, with slowing credit growth likely to weigh on
economic activity in coming quarters we think that, volatility
in food prices aside, inflation still has further to fall. This
will disappoint those hoping for a sustained period of reflation
that could help to erode corporate debt burdens."
    Food prices, the biggest component of the consumer price
index, fell at a slower 1.2 percent from the previous year,
after sliding 1.6 percent in May and 3.5 percent in April.
    "Falling food prices can be attributed to a high build-up of
food reserves and seasonal factors," Zhu Baoliang, chief
economist at the State Information Center (SIC), said, according
to a story published on Monday in China'sFinancial News
newspaper, affiliated with the People's Bank of China (PBOC).
    Tepid inflation comes despite signs of a pickup in factory
activity. China's manufacturing sector expanded at the quickest
pace in three months in June, buoyed by strong production and
new orders. [nL3N1JQ3GA]
    Meanwhile, spot iron ore and construction steel prices have
risen as investors continued to focus on China's capacity
cutbacks and industrial upgrade in the steel sector.
[nL3N1JP2QV]
    "High margins after the government's effort to eliminate
low-grade steel are enticing mills to produce more steel, which
increases the need for iron ore," said Zou Mingdong,
Shanghai-based steel manager at Zhongcai Merchants Investment
Group.
    "However, the rising price doesn't change the fundamental
situation of oversupply and weak demand." [nL3N1JO2FH]
    China's biggest steel maker, Baoshan Iron & Steel
<600019.SS>, cut its main steel products prices for May and June
after a long series of increases.
    On a month-on-month basis, the PPI fell 0.2 percent in June.
    China is targeting economic growth of around 6.5 percent
this year and inflation of 3 percent. Chinese Premier Li Keqiang
said in a speech at the World Economic Forum that China is
capable of achieving its full-year growth target and controlling
systemic risks despite challenges. [nL3N1JO1Q6]

 (Reporting by Sue-Lin Wong; Editing by Sam Holmes)
 (([email protected]; +86-10-6627-1242;
+86-139-1112-9340;))

Keywords: CHINA ECONOMY/INFLATION (UPDATE 1, PIX)






Related Posts:

Share!
Share On Twitter
Share On Linkedin
Share On Pinterest
Share On Stumbleupon
Share On Reddit
Loading Facebook Comments ...
0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply