BEIJING: China‘s consumer price inflation slowed to its weakest pace in almost a year in August, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to growing evidence of a steadying economy. Indeed, the broader inflation trends shown in Friday’s data confirm recent signs of a more sure-footed recovery in the world’s second-biggest economy, allowing authorities to resist any fresh monetary easing as they move to curb an unsustainable build up of credit in the financial system.
“The picture is still one of rising price pressures, and for that reason I’d be skeptical of claims this latest drop in inflation is going to increase the likelihood of further monetary easing by the central bank,” said Capital Economics’ China economist Julian Evans-Pritchard in Singapore. “What’s holding them back from further easing is not inflation concerns, it’s concerns of credit risks.” A housing and construction rebound has boosted industries including steel and coal, and while many sectors continue to struggle with overproduction, domestic demand has held up reasonably well, with trade data on Thursday showing a surprising improvement in imports.
