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China Factory Inflation Pauses Slide as Consumer Prices Ease

Published 10/05/2018, 12:26 pm
Updated 10/05/2018, 01:58 pm
© Bloomberg. A worker sits on panels for shipping containers in the welding shop at the Singamas Container Holdings Ltd. factory in Qidong, China, on Thursday, June 22, 2017. As part of their pledge to cut emissions by 70 percent by the end of this year, manufacturers are coating containers with water-borne paints that release less toxic fumes than oil-based varieties before China starts levying a green tax in January 2018. Photographer: Qilai Shen/Bloomberg

© Bloomberg. A worker sits on panels for shipping containers in the welding shop at the Singamas Container Holdings Ltd. factory in Qidong, China, on Thursday, June 22, 2017. As part of their pledge to cut emissions by 70 percent by the end of this year, manufacturers are coating containers with water-borne paints that release less toxic fumes than oil-based varieties before China starts levying a green tax in January 2018. Photographer: Qilai Shen/Bloomberg

(Bloomberg) -- China’s factory inflation gained pace, snapping a five-month streak of declines, while the consumer price index eased.

The producer price index rose 3.4 percent in April from a year earlier, in line with the estimate in a Bloomberg survey and up from 3.1 percent in March. The consumer price index climbed 1.8 percent, the statistics bureau said Thursday, versus a forecast 1.9 percent gain and prior reading of 2.1 percent.

Producer inflation pressures remain broadly on an easing trend since reaching an eight-year high in February 2017. In recent months solid external demand has helped underpin the economic expansion even as the trade tensions with the U.S. add uncertainty to the outlook.

“Inflation remains well-behaved,” said Dariusz Kowalczyk, senior emerging-market strategist at Credit Agricole (PA:CAGR) SA in a Bloomberg Television interview. “This means that monetary policy will remain steady. Benchmark rates will not be changed this year and rates used in open-market operations will be moved only marginally higher in lockstep with the Fed in terms of timing but by much smaller increments.”

Despite a PPI acceleration from a year earlier influenced by a low base, factory prices fell from a month earlier, signaling that a turning point for the moderation in the headline index may not have been reached just yet.

“Inflation pressure will pick up in coming months, but won’t rise to the level that would affect monetary policy,” said Zhu Qibing, chief macro-economy analyst at BOC International China Ltd. in Beijing. “PPI may continue to rebound on supply-side reforms and pollution curbs.”

A gauge of raw materials producer prices picked up to 5.7 percent from 5.1 percent, while indexes for manufacturing and mining also gained. Consumer inflation for food slowed to 0.7 percent from 2.1 percent. A gauge for consumer goods edged lower.

(Updates to add economist comments from fourth paragraph.)

© Bloomberg. A worker sits on panels for shipping containers in the welding shop at the Singamas Container Holdings Ltd. factory in Qidong, China, on Thursday, June 22, 2017. As part of their pledge to cut emissions by 70 percent by the end of this year, manufacturers are coating containers with water-borne paints that release less toxic fumes than oil-based varieties before China starts levying a green tax in January 2018. Photographer: Qilai Shen/Bloomberg

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