Beijing: China's producer price inflation eased more than expected in July, slowing to its weakest in three months, while consumer inflation also cooled, official data showed on Sunday, as global energy prices retreated despite the U.S.-Iran war.
China's leaders, confronting a two-speed economy of strong factory output and exports but weak domestic demand, have pledged to bolster growth by accelerating fiscal spending on already budgeted infrastructure projects through year-end.
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Consumer and producer inflation "weakened in July. This is consistent with other activity data such as the PMI index, which also dropped more than expected," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
"The economic momentum softened in Q2. The Politburo in July signalled stronger fiscal spending as the policy response. The transmission of the fiscal spending will take time."
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The producer price index rose 3.5% from a year earlier in July, National Bureau of Statistics data showed, easing from 4.1% in June to its lowest in three months. It was below economists' expectations for a 3.8% increase in a Reuters poll.
Although some of China's upstream and high-tech sectors have maintained strong profit growth, more domestic market-facing manufacturers struggled against sluggish demand as overall economic growth lost steam. Rising input costs risk further squeezing their profit margins and dampening confidence.
