Factory deflation eases amid recovery

Business | Bloomberg 10 Jul 2020

China's factory deflation eased back in June as economic recovery continued and consumer inflation ticked up.

The decline in the producer price index narrowed to 3 percent last month from May's 3.7 percent, the National Bureau of Statistics said yesterday.

The consumer price index, meanwhile, rose 2.5 percent year-on-year following a 2.4 percent gain in the previous month.

The improvement in factory gate deflation indicates that a slow recovery continues, while the rise in consumer inflation is mainly due to a rebound in food prices rather than stronger overall demand.

With the outlook for exports grim due to the pandemic raging in other nations, policymakers will continue to face pressure to support the economy.

The narrowing PPI deflation in June is because "international commodity prices picked up, domestic manufacturing steadily recovered and market demand continued to improve," the NBS said.

Core inflation slowed to 0.9 percent.

A variety of temporary factors pushed up food prices in June, with pork prices rising almost 82 percent due to slower hog production, strict epidemic prevention requirements and falling imports, the NBS said.

Serious floods recently and a coronavirus cluster in Beijing's biggest wholesale food market caused a temporary shortage of vegetables in some areas.

Meanwhile, the yuan rose above 7 per dollar yesterday to the highest since mid-March.

The onshore yuan rose 314 points to 6.9862 per dollar yesterday, while the offshore yuan strengthened 128 points to 6.9858 per dollar last night.

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