China inflation steady in June

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BEIJING: China’s factory gate prices stabilized in June after slowing for three straight months, official data showed Monday, but analysts expect weakening economic growth will continue to weigh on inflation.

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The producer price index rose 5.5 percent from a year ago, the National Bureau of Statistics said, unchanged from May and in line with a Bloomberg News estimate.

After hitting an eight-year high of 7.8 percent in February, the pace of growth in producer prices has slowed as Beijing puts the brakes on freewheeling credit as fears of a financial crisis grow.

Consumer prices, a gauge of retail inflation, rose 1.5 percent in June from a year earlier, slightly below analyst expectations of 1.6 percent but steady compared with May.

“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,” said Julian Evans-Pritchard, China economist at Capital Economics.

Tighter restrictions on China’s real estate market and bank lending are expected to drag on the world’s second largest economy, reducing demand for raw materials and weighing on prices.

“It’s all about PPI and it’s all about how long until PPI is negative year-on-year again,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong.

“This month is surely just a holding action in that regard.”

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