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China’s factory deflation eases on signs of economic recovery

China’s factory deflation eases on signs of economic recovery

Chinese factory prices marked the slowest level in five months in August from a year earlier, amid signs of economic recovery as the world’s second-biggest economy returned to growth in the second quarter.  

According to data released by China's National Bureau of Statistics, the producer prices index (PPI), which measures commodity costs at the factory gate, dropped 2.0% year-on-year in August from a previous of -2.4%. Expectations were in favor of a 1.9% decline.

After seven consecutive months of drop in prices, the deflation narrowed as the removal of Covid-19 restrictions continued to help the economy to recover.

Data released this week showed that China's export climbed 9.5 percent in dollar terms in August from a year earlier to $235.3 billion, marking the largest monthly increase since March 2019.

On the other hand, the annual consumer price index (CPI) showed consumer inflation slowed to 2.4 percent in August from 2.7 percent, amid falling pork prices.

Core inflation, omitting volatile food and energy prices, surged 0.5% annually in August, similar to July’s reading, suggesting domestic demand still remained soft.

As of 08:13 GMT, the dollar traded 0.09 percent lower versus the offshore yuan at 6.8476, where the pair hit its lowest level since May 2019 last week.

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