China's consumer prices posted their first annual decline in more than two years in July, while factory gate prices extended their falls, data showed on Wednesday, as lacklustre demand weighed on the economy.
A vendor is seen in her store at a supermarket in downtown Beijing, China, May 23, 2019. REUTERS/Jason Leein more than two years in July, while factory gate prices extended their falls, data showed on Wednesday, as lacklustre demand weighed on the economy.XING ZHAOPENG, SENIOR CHINA STRATEGIST, ANZ, SHANGHAI
"Both CPI and PPI in year-on-year terms fell into negative territory and confirmed economic deflation. The only bright spot was that the core CPI rebounded to 0.8% due to seasonal tourism during the summer, but I am afraid that it may lack sustainability. Given the base remained high last year, CPI will hardly rebound significantly in the second half of the year. It is expected to hover around 0. It would be hard to maneuver monetary policy.
"With destocking and credit expansion, we expect PPI and CPI will rebound from the bottom in the fourth quarter. China launched intensive stimulus measures after the July politburo meeting, it will take time to reflect. The central bank may cut interest rates by another 10bp in the rest of the year. At present, the economy is recovering from the bottom, and I believe it will not take too long for the data to bottom out.
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