China factory gate inflation holds steady
August 16, 2017 Category Macro-economy, Weekly
China’s producer price inflation held steady in July, with prices for key raw materials up slightly on expectations of deeper production capacity cuts going into the winter months of heavy pollution, while consumer inflation slowed slightly. The producer price index rose 5.5% last month from a year earlier, unchanged from June, the National Bureau of Statistics (NBS) said. On a month-on-month basis, the producer price index rose 0.2% in July, after three months in the red, with the NBS attributing this to a rise in the prices of commodities including steel and non-ferrous metals. Prices of commodities futures including steel rebar used in construction began to rise again in June and have continued to surge through early August, underscoring concerns over tight supply amid pollution inspections and strong restocking demand. China has eliminated about 120 million tons of low-grade steel capacity and 42.39 million tons of crude steel production capacity in the first half of the year, equivalent to 84% of its target for the whole year. Weaker factory price inflation could start to weigh on profits at China’s large – and often heavily indebted – industrial firms, who have benefited from a strong commodities reflation cycle over the last year. Chinese policymakers have clamped down on expansion of the money supply and broad credit growth has also moderated, which could weigh on any further industrial recovery in China, the South China Morning Post reports.
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