China's factory deflation slows in July as recovery gains strength

[BEIJING] China's factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world's second-largest economy.

The producer price index (PPI) fell 2.4 per cent from a year earlier in July, the National Bureau of Statistics (NBS) said in a statement, compared with a 2.5 per cent decline tipped in a Reuters poll of analysts and a 3 per cent drop in June.

Analysts say China's industrial output is steadily returning to levels seen before the pandemic paralysed huge swathes of the economy, as pent-up demand, government stimulus and surprisingly resilient exports propel a recovery.

Iron ore futures prices in Dalian have rallied over 50 per cent so far this year while prices of steel bars used in construction have jumped 12 per cent.

But some economists warn the recovery could stall amid cautious consumer spending and a resurgence in global infections. Floods due to heavy rainfall have also disrupted production in some parts of the country in recent months.

Consumer inflation edged up in July as the bad weather pushed food prices higher.

The consumer price index (CPI) rose 2.7 per cent from a year earlier, compared with an expected 2.6 per cent increase and a 2.5 per cent rise in June. Pork prices rose 85.7 per cent on a yearly basis.

However, core inflation, which excludes food and energy costs, rose a mere 0.5 per cent in July from a year earlier.

REUTERS