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China's consumer inflation muted, economy solid

Xinhua | Updated: 2017-08-10 09:43

BEIJING - China's consumer and factory-gate inflation held steady in July as the world's second-largest economy stayed on track for solid growth.

The consumer price index (CPI), a main gauge of inflation, rose 1.4 percent year-on-year in July, the National Bureau of Statistics (NBS) said Wednesday.

It was slightly down from June's 1.5 percent. On a month-on-month basis, the index was up 0.1 percent, according to the bureau.

Food prices, the biggest component of the CPI, were down 0.1 percent, dragging down the growth rate of the index by 0.02 percentage points, the NBS said.

Vegetable prices surged 7 percent after declining for five straight months as a scorching summer and heavy rain restricted output. Fruit prices shed 9.2 percent due to oversupply. Pork prices declined 0.7 percent as consumption fell in summer.

Year-on-year, food prices dropped 1.1 percent in July while non-food prices rose 2 percent.

Excluding volatile food and energy prices, the core CPI increased 2.1 percent year-on-year in July.

In the first seven months, the CPI rose 1.4 percent year-on-year.

China's producer price index (PPI), which measures costs for goods at the factory gate, rose 5.5 percent year-on-year in July, according to the NBS.

It was unchanged from the previous two months. On a month-on-month basis, the index was up 0.2 percent.

Factory-gate prices rose in the ferrous metal mining and non-ferrous metal smelting industries, which widened to 2.7 percent and 1.5 percent from a month earlier, respectively, said NBS senior statistician Sheng Guoqing.

Meanwhile, prices in the oil and gas extraction and refining industries dropped 5.3 percent and 3 percent month on month, respectively.

China's PPI has remained in positive territory since September, when it ended a four-year streak of declines, partly due to the government's successful campaign to cut industrial overcapacity, which benefited the wider economy.

Analysts estimate consumer inflation will remain muted for the whole year.

Wen Bin, chief researcher with China Mingsheng Bank, said that with holidays approaching, food prices are expected to rebound on rising consumption. The overall pace will be mild.

China reported 6.9-percent GDP growth for the first half of 2017, exceeding the 6.7-percent rise in 2016 and beating expectations.

The country's manufacturing purchasing managers' index (PMI) came in at 51.4 in July, down from 51.7 in June. The non-manufacturing PMI came in at 54.5 in July, down from 54.9 in June.

It was explained by economists as a normal fluctuation and did not tell much about the cyclical trend of China's economy. The positive economic outlook remained unchanged.

Taming inflation leaves the central bank leeway to stay composed in raising interest rates. China's monetary policy in 2017 is set to be "prudent and neutral" to keep appropriate liquidity levels and avoid large injections.

Over the past year, the bank has steered clear of interest rate cuts and avoided tinkering with reserve requirement ratios while adopting an expanded range of tools, such as reverse repos and lending facilities, for more nimble maneuvering.

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