BEIJING (Reuters) – China’s factory auction loses in July, driven by rising global oil prices and as industrial activity climbed back to pre-coronavirus levels, adding to signs of recovery in the world’s second largest economy .
PHILO PHOTO: A worker is seen at a hot rolling production line at the Chongqing Iron and Steel Factory in Changshou, Chongqing, China August 6, 2018. REUTERS / Damir Sagolj
The producer price index (PPI) fell 2.4% from a year earlier in July, the National Bureau of Statistics (NBS) said in a statement on Monday, compared to a 2.5% drop in a Reuters poll of analysts and a decline of 3.0% in June.
Analysts say China’s industrial production is slowly returning to levels seen before the pandemic paralyzed the economy’s enormous swaths as growing demand, government stimulus and surprisingly strong exports make a recovery.
Future prices for iron ore in Dalian have increased more than 50% so far this year while prices of steel bars used in construction jumped 12%.[IRONORE/]
Prices of extraction of petroleum and natural gas led the gains of the headline, and increased 12% month-on-month, thanks to the continuous rebound in global crude oil prices, according to Dong Lijuan, a senior statistician at NBS. Prices for coal extraction and car manufacturing also turned positive in July.
“A further rise in fiscal stimulus should continue the rise in infrastructure spending in the coming months, and support a further recovery in economic activity and producer prices,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
BAD WEATHER
However, PPIs rose 0.4% on a monthly basis, unchanged from the increase in June, pointing to penalties on construction and manufacturing works caused by recent floods in southern China. Some economists have warned that the recovery could sit at noon with cautious consumer spending and a resurgence in global infections.
Consumer inflation also picked up in July when bad weather pushed food prices higher.
The consumer price index (CPI) rose 2.7% from a year earlier, its fastest pace in three months and compared to an expected rise of 2.6% and a rise of 2.5% in June.
It was mainly driven by rising pork prices, which rose 85.7% year-on-year.
However, core inflation, which excludes food and energy costs, rose 0.5% in July from a year earlier.
“The higher than expected price increase will strengthen the determination of monetary authorities to normalize policy,” said Hu Yuexiao, chief macro analyst at Shanghai Securities.
Report by Yawen Chen and Se Young Lee; Edited by Sam Holmes
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