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China’s inflation up 1.5% in June

CHINA'S consumer and factory gate inflation both remained flat in June, allowing more room for a relatively tight monetary stance.

The Consumer Price Index, a main gauge of inflation, rose 1.5 percent year on year in June, the same as in May and remaining below 2 percent for five consecutive months, the National Bureau of Statistics said today.

The reading was slightly lower than market consensus forecast for 1.6 percent.

Meanwhile, the Producer Price Index, which measures costs for goods at the factory gate, rose 5.5 percent year-on-year, the same as in May and was the lowest since last December.

Sheng Guoqing, a bureau analyst, said the consumer inflation was sustained by price increases in the non-food sector.

Non-food prices rose 2.2 percent year-on-year led by prices of medical and healthcare services, education, housing, and transportation.

Food prices fell 1.6 percent, mainly due to lower prices of egg, pork, and fresh vegetables.

Concerning PPI, Sheng said prices rose slower across coal, oil and gas, oil processing, and metal industries.

Economists said PPI will continue to moderate in the coming months while core consumer inflation, or CPI excluding food and energy, will likely improve.

“Both CPI and PPI were unchanged in June, as resilient non-commodity PPI and an uptick in core CPI offset sluggish food and energy prices,” Morgan Stanley said in a note yesterday. “We expect PPI to moderate into low-flationary territory in the second half and next year on base effects, and core CPI will likely improve further given the resilient job market.”

The bank said policymakers will maintain a hawkish bias to rein in leverage and financial risks as inflation remains within the comfort zone of the People’s Bank of China.




 

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