China factory prices fall more slowly in August with recovery on track

BEIJING (Reuters) – China’s factory gate prices fell for the seventh straight month in August but at the slowest annual pace since March, suggesting the industries of the world’s No. 2 economy continued to recover from the sharp coronavirus-induced downturn.

The producer price index (PPI) eased 2.0% from a year earlier in August, the National Bureau of Statistics (NBS) said on Wednesday. That was in line with expectations in a Reuters poll, but the decline was more modest than the 2.4% fall in July.

The consumer price index meanwhile rose 2.4% last month from a year earlier, as expected, slower than a 2.7% annual increase in July.

China’s economy returned to growth in the second quarter after a massive coronavirus-induced contraction at the start of the year. Recent indicators, including exports data and the PMI surveys, have pointed to a sustained recovery in economic activity and manufacturing.

“In August, industrial production continued to improve while market demand kept recovering,” said Dong Lijuan, senior statistician with the NBS, in a statement accompanying the data release.

“Prices for global commodities such as crude oil, iron ore and non-ferrous metals continued to rise, driving a rebound in domestic factory-gate prices.”

PPI rose 0.3% in August on a monthly basis.

Policymakers expect economic activity and consumer demand to continue to increase as the coronavirus outbreak comes under control, but warn of risks to the outlook as some of China’s key export markets such as the United States and Europe remain in the grip of the pandemic.

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