China posts benign consumer inflation in July, but producer deflation stays stubborn

Sat Aug 9, 2014 11:19am EDT
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By Pete Sweeney

SHANGHAI (Reuters) - China posted mild consumer inflation on Saturday, well below the annual target in July, giving authorities room to further relax monetary policy, but deflationary pressure for producers remained stubborn, highlighting a wobbly economic rebound.

Data from the National Bureau of Statistics (NBS) showed that the consumer price index (CPI) held steady at 2.3 percent year-on-year in July, while the producer price index (PPI) fell 0.9 percent for the 29th consecutive month.

Both indicators matched analyst forecasts.

Analysts attributed the steady CPI to slides in pric4es for fresh fruit and vegetables, which offset rises in other categories.

"In general, China's inflation outlook remains mild; however, the deflation risks may even rise in the foreseeable future if the growth momentum weakens again," ANZ economists Liu Li-Gang and Zhou Hao said in a research note, reacting to the data.

"Against this backdrop, the central bank should maintain an accommodative bias in the monetary policy stance."

Ma Zihui, researcher at Huarong Securities in Beijing, said the slide in the PPI was "not a good message".

"July macroeconomic data might come out worse than some people expected," he said.   Continued...

A customer looks at items displayed on shelves at a supermarket in Shenyang, Liaoning province April 11, 2014. REUTERS/Stringer