China inflation 2.3 percent in July

China’s inflation remained below the government’s goal in July and factory-gate deflation persisted, suggesting policy makers still have room for monetary easing.

The consumer price index rose 2.3 percent from a year earlier, the National Bureau of Statistics said Saturday in Beijing, the same pace as in June. Factory-gate prices fell 0.9 percent, matching projections and extending the longest stretch of declines since 1999.

Subdued inflation gives Communist Party leaders leeway to roll out more measures to support the economy after authorities expedited railway spending and freed up money for loans to counter a slowdown earlier in the year. The unexpected decline in imports in July reported Aug. 8 partly reflects sluggish investment, said Royal Bank of Scotland Group Plc.

“July inflation data should ease any concerns policy makers and investors may have had about rising sequential inflation amid the economic growth rebound,” Goldman Sachs Group economists led by Beijing-based Song Yu said in a note after the report. “The downward trend shown by food and non-food CPI will leave room for policy makers to maintain relatively supportive policy in the near future.”

Producer prices fell for the 29th straight month, the longest run of declines since 31 months from 1997 to 1999. At the same time, the July drop was the smallest since April 2012, a trend the statistics bureau said Saturday shows an improving supply-demand situation in industrial markets.

The Shanghai Composite Index rose 0.4 percent last week, the fourth straight gain, after export growth unexpectedly accelerated in July. The yuan strengthened 0.38 percent against the dollar during the week, the biggest advance in almost two months, as China reported a record monthly trade surplus.

Downward pressure on some prices will continue amid antitrust investigations by the nation’s top economic-planning agency. Toyota Motor and Honda Motor’s Chinese ventures last week joined BMW, Mercedes-Benz, and Audi brand in announcing a cut in prices of spare parts after the National Development and Reform Commission said it was probing whether automakers manipulated prices.

The government’s goal is to keep consumer-price increases within about 3.5 percent this year while achieving economic growth of about 7.5 percent, Premier Li Keqiang announced in March.

The housing component of the CPI, which includes rental costs, utilities and building materials, rose 2 percent from a year earlier in July, the smallest increase in two years.

“Domestic demand is still fairly weak, especially with property in a down cycle, so for the rest of this year I’m not really worrying about inflation pressure,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong.

Trade data released by the General Administration of Customs on Aug. 8 showed overseas shipments rose 14.5 percent in July from a year earlier and imports fell 1.6 percent. Surges in sales to the United States and European Union, China’s biggest markets, indicate demand from abroad will help sustain expansion.

Bloomberg