China inflation eases in June: govt

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BEIJING: China’s consumer price growth slowed in June, the National Bureau of Statistics (NBS) said Sunday, giving the central government room for further monetary stimulus to stabilise economic growth.

The consumer price index (CPI) — a main gauge of inflation — rose 1.9  percent on-year, the National Bureau of Statistics said, lower than May’s 2.0  percent but higher than the 1.8 median forecast in a Bloomberg News survey of  economists.

Moderate inflation can be a boon to consumption as it pushes buyers to act  before prices go up, while falling prices encourage shoppers to delay purchases  and companies to put off investment, both of which can hurt growth.

Food prices fell 1.4 percent month-on-month, the data showed, weighing down  the overall inflation figures.

The world’s second largest economy expanded last year at its slowest rate  in a quarter of a century as Beijing strives to effect a difficult transition  in its growth model away from reliance on exports and fixed-asset investment  towards one driven by consumers.

The producer price index (PPI), which measures the cost of goods at the  factory gate, fell 2.6 percent year-on-year last month, narrower than the 2.8  percent decline in May, as deflation pressures eased due to a rebound in some  commodity prices.

Protracted declines in PPI bode ill for industrial prospects, but narrowing  declines in the last two months have fuelled hopes the Chinese economy could be  reaching the bottom of a painful slowdown.

Looking ahead, analysts said widespread flooding due to summer heavy rains  could put short-term pressure on China’s industrial output.

Construction is likely to spike once the floods subside, but in the short  term industrial production growth will see “negative shocks”, Zhang Yao of  Nomura said in a note.

Food prices could spike due to the destruction of crops and livestock by  floods, said Chang Liu of Capital Economics, increasing the risks of an rise in  consumer inflation in the second half of the year.