China’s Factory Inflation Eased in June as Commodities Steadied

© Reuters. China’s Factory Inflation Eased in June as Commodities Steadied

(Bloomberg) — China’s factory inflation eased in June from an almost 13-year high in the previous month as a stronger dollar and government measures helped to cool commodity prices.

The producer price index rose 8.8% from a year earlier after jumping 9% in May, the National Bureau of Statistics said Friday. That was the same as the median forecast in a Bloomberg survey of economists. Consumer prices increased 1.1% from a year ago, lower than in May and below the estimate of 1.2%.

Global commodity prices were mostly flat in June after rallying for more than a year, with the Federal Reserve’s hawkish shift pushing the greenback higher and weighing on commodities, which are mostly priced in dollars. Chinese regulators also took a number of steps to tame prices, from requesting commodity firms cut their bullish futures bets to pledging more releases of metal reserves.

The data was in line with the decline of both input and output prices in the official manufacturing purchasing managers’ index in June. A higher base a year earlier, when the economy was starting to recover from the pandemic, also likely helped to moderate inflation.

So far, price pressures have been mostly felt by upstream sectors, with producers unable to pass on the price increases to consumers due to intense competition and a slow recovery in domestic consumer demand. People’s Bank of China’s Governor Yi Gang said last month that consumer inflation will stay under 2% this year, below the government’s official target of about 3%.

In a surprise move, the government hinted this week that it will cut the reserve requirement ratio, or the amount of money banks must keep in reserve, in order to help firms deal with the impact of rising commodity prices. This could better support small businesses and lower their financing costs, the State Council said in a statement Wednesday.

©2021 Bloomberg L.P.

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