China inflation eases to 2.6% year-on-year

Vendor counts money in a vegetable market in Shanghai Chinese inflation slowed to 2.6 percent year-on-year in August, the National Bureau of Statistics said Monday, giving the government more room to unveil new measures to boost the world's number two economy. The rise in the consumer price index, a main gauge of inflation, was slightly lower than July's 2.7 percent.
In the first eight months of the year, the CPI rose 2.5 percent year-on-year, below both the government's 3.5 percent target for 2013 and a touch below the 2.6 percent seen in 2012.
"The low CPI inflation means that the new government still has spacious room for bolstering growth via implementing a mini fiscal stimulus and avoiding monetary tightening, and the rising PPI inflation suggests the economy has been recovering," Bank of America Merrill Lynch economists said in a research note.
Authorities said food prices were the main driver of the August increase, with meat, egg and vegetable costs all going up, partly due to higher than average temperatures and lower rainfall, Yu Qiumei, a senior NBS analyst, said in a statement.
China's producer price index (PPI), which measures prices of goods at the factory gate, rose 0.1 percent in August from July, according to the NBS. It was the first increase in six months and came after five months of deflation.
"The changes in PPI showed that... trends of the national economy stabilising and rebounding are becoming clear," said Yu.
The PPI fell 1.6 percent year-on-year in August, up from a 2.3 percent decrease in July and the highest reading in six months, NBS data showed.
The inflation figures followed a string of data in recent weeks indicating that the Chinese economy, a key driver of global growth, is showing signs of rebounding following a downtrend in the first half of the year.
The economy expanded 7.7 percent last year, the slowest since 1999.
In the final quarter of last year, growth accelerated to 7.9 percent, but has slowed in successive quarters to 7.7 percent in January-March and 7.5 percent in April-June.
But the world's largest exporter posted better sales last month with stronger-than-expected exports growth of 7.2 percent year-on-year to $190.6 billion as demand in overseas markets improved.
A measure of China's manufacturing activity also strengthened in August to its highest level in 16 months, with the closely watched official purchasing managers' index (PMI) rising to 51.0 from 50.3 in July. A reading below 50 indicates contraction, while anything above signals expansion.
Another PMI measure released by HSBC rebounded to 50.1 in August, its first month of expansion since April.
Source: AFP