China July producer prices slump to near 6-year low

Shopper inflation edged as much as a still-low 1.6 % year-on-year in July, authorities knowledge confirmed Sunday, leaving room for Beijing to chop rates of interest or take different steps to stimulate slowing financial progress. The year-over- year fall in the producer-price index is the worst in almost six years.

An official factory survey last week showed deteriorating conditions forced companies to cut staffing for the 21st straight month, and manufacturers had to reduce selling prices to a six-month low due to increasing competition. On a monthly basis, the index went down 0.7 percent in July.

NBS statistician Yu Qiumei attributed the CPI hike mainly to higher pork prices, a staple diet. China’s exports to the European Union fell 2.5 percent year on year in the first seven months of 2015, while shipments to Japan dropped 10.5 percent. “Monetary policies will not change with the price of individual commodities, but will observe the general price trends”, the central bank said in its policy report. “China still faces grim deflation risk”, noted Qu Hongbin, chief China economist at HSBC.

The World Bank predicted that energy prices will average 39 percent below 2014 levels this year, with metal prices down 16 percent and iron ore plummeting 43 percent.

Other analysts said that the government would likely respond to the persistently weak data and roll out more infrastructure spending. Weak demand caused by shrinking business activity will in turn sink commodity prices.

The survey collects prices from more than 63,000 outlets including grocery stores, supermarkets, shopping malls and agricultural trade markets across 500 cities and counties in the country, the NBS says.