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China's Factory-Gate Deflation Eases in Capacity-Cut Drive

Posted by Chris Advincula on Jun 9, 2016 1:58:10 AM

(June 8 Bloomberg) Deflationary pressures in China's industries eased further in May, while consumer price gains continued to be subdued enough to offer the central bank scope for more easing if needed.

Amid a drive by the Communist Party leadership to cut excess capacity, producer prices fell 2.8 percent, the least since late 2014 and less than the 3.2 percent decline economists had estimated in a Bloomberg survey. The consumer price index rose 2 percent from a year earlier, less than the median forecast of 2.2 percent.

Easing factory-gate deflation is the latest signal of stabilization after more than four years of falling producer prices. Tepid consumer price gains may allow the People's Bank of China, which has kept interest rates at a record low since October, room to add further stimulus in the short term to help prop up growth.

"The deflationary threat has substantially diminished," said Raymond Yeung, a senior economist with Australia & New Zealand Banking Group Ltd. in Hong Kong. "Domestic demand has stabilized so we don't see a strong upward pressure either. We still think the PBOC will remain moderately accommodative."

Click on the link below to see the full story from Bloomberg: 

China's Factory-Gate Deflation Eases in Capacity-Cut Drive

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Topics: Asian market, Forex, inflation, China Economy, Fundamentals, China CPI, PPI

 

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