China producer prices fall at slowest in 4 years: govt

China producer prices fall at slowest in 4 years: govt

BEIJING - China's producer prices fell at their slowest rate for more than four years in August, the government said Friday, another sign of stabilisation in the world's second-largest economy.

Chinese workers make Santa Claus dolls at a toy factory in Ganyu district in Lianyungang, east Jiangsu province

The news came a day after Beijing unveiled a forecast-beating rise in imports -- the first in almost two years -- raising hopes that a long period of slowing growth could be bottoming out.

The producer price index (PPI), which measures the cost of goods at the factory gate, fell 0.8 percent in August, National Bureau of Statistics said.

It was the smallest fall since April 2012, figures from Bloomberg News showed, and was significantly narrower than July's 1.7 percent decline.

Protracted drops in PPI bode ill for industrial prospects and economic growth, as they put off customers -- who seek to delay purchases in anticipation of cheaper deals in future -- starving companies of business and funds.

Chinese PPI has been negative for more than four years but narrowing declines in the past three months have fuelled hopes for the country -- a key driver of the world economy.

China's 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 from reliance on exports and fixed-asset investment towards one driven by consumers.

Last month's PPI drop was less than the 0.9 percent decline forecast by a Bloomberg News survey of economists.

"It shouldn’t be long before headline producer price inflation is back in positive territory," said Julian Evans-Pritchard of Capital Economics.

ANZ Research analysts expected that shift to positive would occur before the end of the year, but predicted that China's general price level would nonetheless remain stable.

"The upward pressure will not be strong either given the lingering overcapacity issue," they said in a statement.

But consumer inflation eased to 1.3 percent in August, the NBS said, marking its lowest level since October.

The figure was down heavily from July's 1.8 percent and lower than estimates of a 1.7 percent rise in the Bloomberg survey.

Even so Evans-Pritchard said in a note: "We aren’t particularly concerned by the decline as it was entirely due to more subdued food price inflation."

Vegetable price rises rose following the worst summer flooding in decades, but were offset by a sharp fall in pork price inflation.

Analysts agreed that the August data was unlikely to increase the likelihood of further monetary easing by the central People's Bank.

"It is concerns over credit risks, not inflation risks, that is keeping the PBoC on hold," Evans-Pritchard explained.

ANZ Research concluded that the possibility of further easing had "significantly declined".

Investors shrugged off the data, with Chinese stocks flat by the break.

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