Chinese Factory Inflation Cools On Trade War, Causing Serious Concerns

Forex News

Chinese factory price inflation has slowed in July. The downturn was due to trade war with the United States. According to the National Bureau of Statistics, producer price index increased 4.6% comparing to 2017, slowed from June’s 4.7%. In mom terms, the PPI grew 0.1% in July, while in June it rose 0.3%. Raw material prices surged 9.0% in July comparing to 2017, which was slowed than 8.8% lift in June.

Senior China Economics at Capital Economics Julian Evans-Pritchard noted: “Looking ahead, China's retaliatory tariffs against the U.S. and the renminbi's recent depreciation will put some upward pressure on import prices". He also claimed: "The big picture is that we still think inflation on both (consumer and producer) measures is set to cool during the coming quarters as China's economy slows and commodity prices fall. This should give the People's Bank plenty of room to further loosen monetary policy."

China's July import growth hit its 7-month maximum. Still, inbound shipments are expected to point at weakening. After Donald Trump promised to raise tariffs to 25% on $200 billion of Chinese goods, China hit Washington with retaliation tariffs of $60 billion of US imports, including liquefied natural gas, iron ore and steel to aircraft. Moreover, it announced additional tariffs of 25% on $16 billion of US goods, ranging from fuel and steel products to autos and medical equipment.

Trade war also raised concerns about inflation. Consumer inflation improved, comparing to June. The CPI bounced 2.1% comparing to 2017. In mom terms, the Index grew 0.3%. The food price index was up 0.5% comparing to 2017, higher than June’s 0.3%. Non-food prices rose 2.4%, up from 2.2% lift in June.