By Gina Lee
Investing.com – Chinese factory gate prices rose at a faster rate in July comparative to the previous month. This added to the pressures faced by businesses as they deal with rising raw material costs, although consumer inflation eased a little.
Data released by the National Bureau of Statistics (NBS) earlier in the day said the consumer price index (CPI) rose 1% year-on-year, higher than the 0.8% in forecasts prepared by Investing.com but lower than the 1.1% recorded during the previous month. The CPI grew 0.3% month-on-month, higher than the 0.2% in Investing.com forecasts and June's 0.4% contraction.
Meanwhile, the producer price index (PPI) rose 9% year-on-year in July, higher than the 8.8% recorded in both the forecasts prepared by Investing.com and the previous month.
“PPI will probably be around 6% by the year-end. This will to some extent limit the room for monetary easing... the possibility of a rate cut is extremely small,” Commerzbank AG (OTC:CRZBY) senior emerging markets economist Zhou Hao told Bloomberg.
Although the data suggested that the Chinese recovery from COVID-19 disruptions is largely complete, bottlenecks in the global supply chain and higher commodity prices are contributing to a slowdown in expansion.
China also continues to deal with its latest COVID-19 outbreak involving the Delta variant, with restrictive measures currently in place throughout many parts of the country. The recent heavy rainfall and floods in some areas also impacted economic activity.
Another focal area is the sky-high commodity prices that have squeezed manufacturers’ margins. The government continues efforts to bring these prices down, which include more stringent inspections on trading platforms and releasing state reserves.