China shares fall as June producer prices fuel growth, deflation fears

Pork prices have surged in China as the country's pig herds are hit by African swine fever which has in turn caused the cost of other meats to rise

The headline CPI figure was unchanged from May, as higher food price inflation (which was up to 8.3 percent year on year in June from 7.7 percent in May) offset lower non-food price inflation (which dipped to 1.4 percent from 1.6 percent).

The bureau also said that producer prices were flat on year in June and down from 0.6% in the previous month.

BEIJING, July 10 ― Factory prices in China were unchanged in June from a year ago, data showed today, reviving the prospect of deflation as the U.S. trade war hits the crucial manufacturing sector.

A cooling in producer prices, seen as a gauge of industrial demand that gives momentum to investment and profits in the Chinese economy, may rekindle worries about deflation and prompt the authorities to launch more aggressive stimulus.

"In addition to the impact of factors such as climate, the lower base prices of the same period past year is also one of the reasons for the expansion", said the bureau's Dong Yaxiu.

Chinese stocks closed lower on Wednesday, with the benchmark Shanghai Composite Index down 0.44 percent, at 2,915.30.

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At the same time consumer prices managed to meet expectations but the main support came from a surge in food prices owing to the impact of African swine fever on pork supplies and severe weather hitting fresh fruits.

The consumer price index (CPI) in June rose 2.7% in annual terms, driven by higher food prices.

Analysts polled by Reuters expected consumer prices to rise 2.7 percent, matching the pace seen in May.

Some economists said consumer inflation may accelerate due to dwindling pig stocks, but others contended price rises will cool. "There are deflationary risks but the overall pressure is not big, because deflationary risk is only restricted to manufacturing products".

Non-food prices rose 1.4 percent year on year, 0.2 percentage points lower than that of May. Global markets retreated from pricing a 50 basis point cut from the US Federal Reserve this month after stronger-than-expected jobs data from the United States last week.

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