China producer price inflation steadies as demand remains robust

[BEIJING] China's producer price gains held up, signalling that demand in the world's second largest economy could remain robust even in the face of regulatory curbs.

The producer price index rose 5.5 per cent in June from a year earlier, compared with an estimated 5.5 per cent in a Bloomberg survey, which was also the reading in May. The consumer price index increased 1.5 per cent, versus a forecast of 1.6 per cent, the statistics bureau said Monday.

Even as inflation steadies on consolidating commodity prices, regulators' moves to curb excessive borrowing may eventually erode momentum later in the year. Signs of faltering demand for raw materials could become more tangible, as strictures on real estate construction slows output.

"Cooler property activity, slower overall credit growth, and higher funding costs would impose downward pressure in late 2017," UBS Group AG economist Zhang Ning wrote in a recent note. For now, Mr Zhang sees "overall steady growth with industrial production momentum maintained".

BLOOMBERG