China's producer prices up 0.3% in H1

Daniel Fowler
July 10, 2019

Tommy Xie, China economist at OCBC Bank in Singapore, also said he saw the risk of produce prices contracting in annual terms as early as next month.

On a monthly basis, consumer prices edged down 0.1 percent last month.

Companies in the sectors of medical equipment and semiconductor were among the biggest gainers, with Andon Health Co., Ltd. seeing its share price rise by the daily 10-percent limit to 5.69 yuan a share.

The June PPI reading was the lowest since August 2016 when the index last fell year-on-year.

A cooling in producer prices, seen as a gauge of industrial demand that gives momentum to investment and profits in the Chinese economy, may rekindle worries about deflation and prompt the authorities to launch more aggressive stimulus.

In June, the index was flat with the same period past year, according to the NBS.

Prices in the education, culture and entertainment sector, health care and housing rose by 2.4 percent, 2.5 percent and 1.6 percent respectively, with the combined impact on the headline CPI rising by about 0.84 percentage points, according to the bureau.

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China's factory activity shrank more than expected in June as tariffs and weaker domestic demand hit new orders for goods.

"We expect the rise in fruit prices to be short-lived and believe it could subside in coming months when supply increases, while pork prices could rise further due to a sharp decline in hog stock from the spread of African swine fever", said Lu Ting, chief China economist at Nomura.

"With pig stocks still tumbling we think increases in consumer prices will start to accelerate again before long", economists with research firm Capital Economics said in a note.

Factory gate inflation on the other hand slipped from the 0.6% year-on-year clip observed in May to 0.0%.

The oil and natural gas extraction reported a price drop of 1.8 percent year on year.

The PPI fell 0.3% month-on-month in June, down from a 0.2% rise in May, NBS data showed.

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