China’s factory-gate inflation fell to its lowest level in 15 months in June, as the country continues to defy the global trend of rising prices.

The producer pricing index (PPI) increased 6.1 per cent year on year in June, according to the National Bureau of Statistics (NBS), following a 6.4 per cent increase in May. In a Reuters poll, analysts predicted a 6.0 percent increase in the PPI rate.

According to NBS official Dong Lijuan, the slower growth in the PPI was driven by the restart of more industrial output, solid supply chains in important industries, and government policies to stabilise commodity prices.

According to the NBS, inflation in the ferrous metal mining and processing business was the lowest, while producer prices in the oil and gas extraction industry were the highest.

According to Zhou Maohua, an analyst at China Everbright Bank, dropping factory-gate inflation suggests lessening cost pressure on middle and downstream manufacturers.

China’s producer inflation has slowed for six months in a row. This stands in stark contrast to surging global inflation, which has pushed major central banks around the world to boost interest rates.

The consumer inflation rate in the world’s second-largest economy rose by the most in nearly two years, but stayed within the country’s goal range of approximately 3 per cent.

The rise in consumer inflation follows a rise in fuel costs, implying that authorities would need to keep a careful eye on any persistent cost pressures amid the global price boom.

The consumer price index (CPI) rose 2.5 per cent year on year, up from 2.1 per cent in May and the most in 23 months. According to Reuters, the CPI is forecast to jump 2.4 per cent.

After a 0.2 pe rcent reduction in May, the CPI remained steady month on month, exceeding the 0.1 percent drop predicted by Reuters.

According to the NBS, vehicle gasoline costs increased 32.8 per cent in June.

“China will continue to face the dual pressure of structural inflation and imported inflation. The slow recovery of domestic demand will also raise up the headline consumer inflation,” said Ying Xiwen, a senior analyst at Minsheng Bank.

Overall, CPI is predicted to climb modestly and surpass 3 percent in the second half of the year, but the year-to-date average figure will remain within the yearly target, according to Ying.

After a steep COVID-induced collapse caused by massive lockdowns in areas including the business capital Shanghai, China’s economy has shown some indications of revival in recent months.

However, growing challenges remain, particularly concerns about repeating COVID outbreaks. Some places have lately reported incidences of flare-ups, which might impede or even halt healing.

According to reports citing sources, China will release 2023 advance quota for local government special bonds in the fourth quarter in order to stimulate the ailing economy, with the new quota anticipated to be greater than 1.46 trillion yuan ($218.09 billion) for 2022.

In late June, People’s Bank of China (PBOC) Governor Yi Gang committed to maintain accommodating monetary policy to assist economic recovery.

“Monetary policy faces constraints such as aggressive Fed hikes and rising inflation concerns and appears to be switching from a crisis mode into a wait-and-see mode. Looking ahead, we think the PBOC would be careful and data-dependent in calibrating its stimulus,” Citi analysts said in a note.

(Adapted from USNews.com)

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