China's CPI Inflation Slows In June 2008

China's inflation rate fell to 7.1 per cent in June from 7.7 per cent in May. The rate has now been falling steadily from a 12-year high of 8.7 per cent hit in February, according to the latest data from the national statistics bureau.



This reduction comes after months of government efforts to cool inflation by paying subsidies to increase food supplies and imposing price controls on food, fuel and other basic goods, and moves at the central bank to increase the percentage of their deposits that the banks need to keep as reserves.

The government gave no June figure for food prices, but said they rose 20.4 percent in the first half over the year-earlier period. JPMorgan estimated June's food price rise at 17.5 percent, compared with 19.9 percent in May.

China's main planning agency, the National Development and Reform Commission, have said that inflation in housing prices, another key area of concern, slowed slightly in June but that costs in 70 major cities still were up 8.2 over June 2007.

China's producer price index (PPI), which measures factory-gate inflation, reached 8.8% year-on-year in June, the fastest rise since 1999. In May it rose by 8.2%. Since it usually takes six months for manufacturers to pass on their cost pressure to end consumers, this acceleration in the PPI seems likely to drive inflation higher again later in the year.






China's economy grew by 10.4 per cent in the first half of this year, officials also said today. China's economy grew by 10.1 percent in the three months ending June 30 over the same period last year, compared with 10.6 per cent in the first quarter of the year while for the whole of 2007 the economy grew at a rate of 11.9 per cent.

On the other hand export growth - which is the principle driver of the Chinese economy - dropped sharply in June to 18.2 percent which while still very rapid was well down from May's rise of 28 percent. The drop in the rate of increase seems to be due to slowing global demand, prompting suggestions regulators might slow the rise of China's currency, the yuan, or take other steps to help struggling exporters.

China's GDP Growth Slows In Q2 2008

China's economy grew at the slowest pace since 2005 in the second quarter, prompting the yuan's biggest drop in seven weeks on speculation the government will slow its advance to protect exporters. Gross domestic product rose 10.1 percent from a year earlier, down from 10.6 percent in the first quarter, as exports weakened and the government curbed lending. Consumer prices rose 7.1 percent in June, slowing from 7.7 percent in May, according to the latest data from the statistics bureau.





GDP growth cooled for the fourth straight quarter.

The trade surplus for the second quarter narrowed 12 percent from a year earlier to $58.14 billion as import costs climbed and U.S. demand faltered.


Producer prices climbed 8.8 percent in June from a year earlier, the statistics bureau said today, after rising 8.2 percent in May.

China Manufacturing PMI June 2008

China's manufacturing expanded in June at the slowest pace since August 2005 as the growth in export orders weakened for a third month, according to a purchasing managers survey. The Purchasing Managers' Index produced by the China Federation of Logistics and Purchasing fell to 52 from 53.3 in May.



The index of new export orders declined to 50.2 from 53.4. A reading above 50 reflects an expansion, below 50 a contraction.

Those for new orders and output also fell, while the input-price index climbed to a record, underscoring the threat to manufacturing from higher costs for labor and raw materials. In the first five months, 2,331 shoemakers closed in Guangdong province, the world's largest footwear production center,according to the China customs bureau yesterday. The principle causes appear to be rising wages and appreciation in the yuan that has eaten into export profits.

The global economic slowdown which has followed the U.S. housing slump added to the increase in borrowing costs as China's central bank tries to fight the rising inflation may mean that China's growth will drop below 10 percent this year for the first time since 2002. One factor here will be the resilience in exports, and there are already signs of some weakening, since overseas shipments climbed 22.9 percent in the first five months of this year, down from the 25.7 percent gain for all of 2007, and in the present climate it is hard to see this trend reversing.