China's consumer price index (CPI) last month posted a sharper drop than the market expected. The producer price index (PPI) saw its decline ease. Chinese authorities rolled out several curbs during the same period to stop cutthroat competition and competitive price reductions in major institutional sectors, and the efforts appear to be showing some effect.
According to China's National Bureau of Statistics on the 10th, the August CPI fell 0.4% from a year earlier. That is worse than the market forecast compiled by Reuters (down 0.2%) and remained at the same level as the previous month. Reuters said, "This is the fastest pace of decline in six months."
However, core CPI, which excludes food and energy prices, rose 0.9% year over year, marking growth for a fourth straight month. Dong Lijuan, chief statistician at the National Bureau of Statistics, said, "As policies to boost domestic demand and spur consumption continue to take effect, competition in the domestic market has steadily improved."
However, the August PPI fell 2.9% from a year earlier, narrowing the decline. It also met market expectations. The previous month it dropped 3.6% year over year. Chief statistician Dong explained, "This is the first narrowing of the decline since March this year," adding, "Beyond the year-over-year base effect, authorities have strengthened more proactive and effective macroeconomic policies, which positively affected price movements in some institutional sectors."
Reuters viewed this as resulting from authorities recently urging major industries to refrain from cutthroat competition, after performance metrics at leading manufacturers were hit hard by an earlier electric-vehicle price war.
China's PPI has persisted for about three years, hurting manufacturing. On top of that, it is also grappling with uncertainty from the tariff war with the United States. According to recently released trade data, as exports that had temporarily increased due to a truce in the tariff war disappeared, China's August export growth fell to a six-month low.
In addition, prolonged weakness in domestic demand is dragging down consumer prices and weighing heavily on the Chinese economy. Reuters said, "In response, policymakers have repeatedly pledged to promote consumption, and in August they introduced an interest subsidy program for corporations in eight consumer service institutional sectors to encourage borrowing and expenditure."