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Home Business Foreign Business China’s factory prices slide faster in August

China’s factory prices slide faster in August

BEIJING: The prices that Chinese firms pay factories for their goods fell last month at the fastest pace in three years, official data showed on Tuesday, as slackening demand and the bruising US-China trade war drag on the economy.

This file photo taken on August 14, 2019 shows an employee working on a medical glove production line at a factory in Huaibei in China’s eastern Anhui province. The prices Chinese firms pay factories for their goods fell in August at the fastest pace in three years, official data showed on September 10, 2019 as slackening demand and the bruising US trade war drag on the economy. AFP PHOTO/ STR

Consumer prices were also broadly subdued and only supported by a surge of almost 50 percent in the price of pork caused by African swine fever that has ravaged the country’s pig industry.


The producer price index (PPI) — an important barometer of the industrial sector that measures the cost of goods at the factory gate — dropped 0.8 percent year-on-year in August, following a 0.3-percent drop in July.

A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits and drag on the world’s No. 2 economy, which in turn could lead to a drop in prices globally.

While the figure from the National Bureau of Statistics (NBS) marked the second consecutive month of decline, it was slightly better than the 0.9-percent fall forecast in a Bloomberg News survey.

Last month was the first time the PPI had fallen into negative territory since August 2016.

Petroleum and natural gas mining, and coal and other fuel-processing sectors led the drop, NBS official Shen Yun said in a statement, indicating weakness in manufacturing.

However, the consumer price index (CPI) — a gauge of retail inflation — rose 2.8 percent last month, stabilizing from July and beating forecasts.

But while meat and egg prices rose as traditional Chinese mid-autumn festival approaches, pork was the key driver, shooting up 46.7 percent year-on-year, owing to a shortage in supply of the staple, Shen said.

The country’s pig industry has taken a heavy hit from a mass outbreak of African swine fever that has seen huge amounts of the animals culled in recent months, causing China to begin relying on imports.

According to Julian Evans-Pritchard of Capital Economics, further easing measures are likely as pressure in demand and factory-gate deflation deepens.

“Weakening demand dragged producer price inflation further into negative territory last month while surging pork prices kept consumer price inflation elevated,” he said in a note.

“With demand-side pressures on prices increasingly subdued, we think that further monetary easing is on the horizon,” Evans-Pritchard added.

The People’s Bank of China on Friday said it would cut the amount of cash lenders must keep in reserve, saying it would help release more than $100 billion into the stuttering economy.

China also confirmed last week that a new round of trade talks would be held in Washington in early October, in an attempt to patch up the trade tensions between the world’s two biggest economies.

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