China Aug inflation another sign economy is stabilizing

Mon Sep 9, 2013 7:00am EDT
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BEIJING (Reuters) - Muted inflation data on Monday added to a run of August figures suggesting the protracted slowdown in China's economy may be bottoming out, helped by targeted support measures and signs of improved export demand.

A steady consumer inflation rate also gives the People's Bank of China some room to maneuver in response to any shock that might arise as the U.S. Federal Reserve starts to taper its monetary stimulus.

However, any sharp policy shifts in the world's second-largest economy seem unlikely amid concerns about rising property prices and after efforts to curtail unregulated lending.

"There is no sign of any shift in monetary policy," said Jerry Hu, an economist at Shanghai Securities, who saw stable consumer prices in the months ahead.

"I think monetary conditions will become tighter, probably through a combination of quantitative tightening and low interest rates."

Consumer prices rose 2.6 percent in August from a year earlier, the National Bureau of Statistics said, in line with market expectations and July's 2.7 percent rise. Month-on-month, prices were up 0.5 percent, slightly stronger than a forecast rise of 0.4 percent.

Producer prices fell an annual 1.6 percent, less than both a market forecast of 1.8 percent and a fall of 2.3 percent in July. While factory-gate deflation has now lasted for 18 months, the pace of decline has steadily eased from a peak of 3.6 percent in September 2012.

"The trend of stabilization in the economy is becoming clearer," Yu Qiumei, a senior statistician at the bureau, said in a statement.

There are increasing signs that China's economy is finding its feet after slowing in nine of the past 10 quarters, with other data already out for August showing some strength.   Continued...

A view of the city's skyline from the Beijing Yintai Centre building at sunset is seen in Beijing, August 29, 2013. REUTERS/Jason Lee