FILE PHOTO: A vendor is seen in her store at a supermarket in downtown Beijing, China, May 23, 2019. REUTERS/Jason Lee
July 10, 2019
By Stella Qiu and Ryan Woo
BEIJING (Reuters) – China’s producer prices unexpectedly showed no growth in June from a year earlier, raising concerns a slowdown in manufacturing activity will further drag on economic growth.
On the other hand, June’s consumer price growth in annual terms matched a 15-month high seen in May as supply shortages triggered by the African swine fever outbreak and extreme weather conditions continued to push up pork and fruit prices.
China’s producer price index (PPI) in June was flat from a year earlier, the National Bureau of Statistics (NBS) said in a statement. That compared with a 0.6% rise in May and a gain of 0.3% forecast by economists in a Reuters poll.
The change in the PPI 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.
Upstream sectors were particularly weak, with prices for oil and natural gas extraction down 1.8% from a year earlier, the NBS data showed. Price gains in the coal mining sector also eased.
Although Beijing and Washington reached another truce in their trade war last month, economists expect continuing pressure on the Chinese economy as manufacturers shift more production abroad to avoid U.S. tariffs on China-made goods.
China’s factory activity shrank more than expected in June as tariffs and weaker domestic demand hit new orders for goods.
Beijing is fast-tracking more infrastructure projects but prices for some construction materials remain lackluster.
Spot prices for steel rebar in June lingered below the levels of a year earlier and may worsen in the following month due to seasonal slackening of construction activity amid high temperatures and rainfall in summer.
Premier Li Keqiang pledged earlier this month to implement financing tools including reserve requirement ratio (RRR) cuts to support small and private firms, adding to expectations for further stimulus measures.
At the same time, however, he and other top policymakers have reiterated that China will not resort to large-scale stimulus.
The consumer price index (CPI) in June rose 2.7% in annual terms, driven by higher food prices. Fruit prices surged 42.7% from a year earlier while pork prices rose 21.1%.
Analysts polled by Reuters expected consumer prices to rise 2.7%, matching the pace seen in May.
The food price index in June rose 8.3% on year, picking up from May’s reading of 7.7%.
On a month-on-month basis, CPI fell 0.1% in June after remaining unchanged in May.
(Reporting by Beijing newsroom; Editing by Jacqueline Wong)
