China producer prices hit negative territory for first time in 3 years, Latest Business News - The New Paper

China producer prices hit negative territory for first time in 3 years

This article is more than 12 months old

BEIJING The prices Chinese companies pay factories for their goods fell last month at the fastest pace in three years, official data showed yesterday, as slackening demand and the bruising US trade war drag on the economy.

Consumer prices were also broadly subdued and supported only by a surge of almost 50 per cent in the price of pork caused by African swine fever that has ravaged the country's pig industry.

The producer price index (PPI) - a key barometer of the industrial sector that measures the cost of goods at the factory gate - dropped 0.8 per cent on-year in August, following a 0.3 per cent drop in July.

A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits and drag on the world's number two economy, which in turn could lead to a drop in prices globally.

While the figure from the National Bureau of Statistics of China (NBS) marked the second consecutive month of decline, it was better than the 0.9 per cent fall forecast in a Bloomberg News survey.

Last month was the first time the PPI had fallen into negative territory since August 2016.

Petroleum and natural gas mining and coal and other fuel-processing sectors led the drop, NBS official Shen Yun said, indicating weakness in manufacturing.

However, the Consumer Price Index - a gauge of retail inflation - rose 2.8 per cent last month, stabilising from July and beating forecasts.

Mr Julian Evans-Pritchard of Capital Economics said further easing measures are likely as pressure in demand and factory-gate deflation deepens.

"Weakening demand dragged producer price inflation further into negative territory last month while surging pork prices kept consumer price inflation elevated," he said in a note. - AFP