China’s inflation in June stood under the government’s target while factory-gate deflation continued, indicating that central bank officials have more room to implement further monetary easing policies amid minimal price pressures.
The consumer price index increased 2.3 percent from a year ago, reported the National Bureau of Statistics on Friday. This matched the rate reported in June as well as the average forecast given by economists in a Bloomberg News poll. Ex-factory prices plunged 0.9 percent, in line with estimates. This is the longest run of drops since 1999.
The stagnant inflation provides Beijing with more room to implement further measures to boost the economy after it speeded up the pace of railway and infrastructure spending and injected liquidity into some banks to bolster growth in certain sectors of the economy.
Producer prices declined for the 29th consecutive month, the longest losing streak since 31 months spanning 1997 to 1999. The July’s decline was also the smallest such since April 2012. The housing part of the CPI, which is composed of building materials, utilities and rental costs, jumped 2 percent in the year through July, the slowest gain in two years.
Chinese premier Li Keqiang reiterated in March that the government intends to keep consumer inflation increases within 3.5 percent in 2014 and at the same time attain a gross domestic product growth rate of 7.5 percent.
Meanwhile, data released last week showed that Chinese exports surged in July. The General Administration of Customs reported on Friday that overseas deliveries increased 14.5 percent in the 12 months through July, while imports plunged 1.6 percent. The trend in exports growth is expected to continue in the coming months as demand in the U.S. and European Union, which are China’s largest markets, ticks up. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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