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"The improvement in the PPI has been supported by a recovery in raw material prices whose outlook will be more uncertain (ferrous metal PPI rose 6.5% y/y in August vs 2.0% in July). For example, industrial demand may resume after the G20 summit in Hangzhou".
- David Qu and Raymond Yeung, ANZ
According to the National Bureau of Statistics data, Chinese consumer inflation weakened for the fourth consecutive month, while a smaller decline in producer prices spurred expectations that overcapacity in the manufacturing sector started to disappear. The consumer price index jumped 1.3% from a year ago, following a 1.8% rise in July. Meanwhile, a median estimate of economists forecast CPI inflation to weaken to 1.7% on an annual basis. Moreover, from the January 2016, the CPI has been calculated applying a new comparison base simultaneously including more products and services. Producer prices dropped on an annual 0.8% versus expectations for a fall of 0.9% after slipping 1.7% during the previous month. Also, producer prices have been in deflation for four-and-a-half years, being a painful reminder of China's protracted manufacturing slowdown.
In the meantime, gold went up as it swung between small gains and losses Friday in Asia after consumer prices in China release was lower than expected, capping recent upbeat data in trade and manufacturing from the country that is the second largest importer of the yellow metal.