China's consumer prices drop fastest in 6 months as factory deflation eases

China's consumer prices fell at the fastest pace in six months in August but producer deflation eased, suggesting policymakers' efforts to rein in excessive competition and price cuts in key industrial sectors were starting to bear fruit. 

The producer price index dropped 2.9 per cent year-on-year in August, National Bureau of Statistics (NBS) data showed on Wednesday, narrowing from a 3.6 per cent decline the previous month. 

Economists polled by Reuters had projected a 2.9 per cent fall. 

The easing in factory-gate deflation comes after authorities recently stepped up calls for key sectors to scale back cut-throat competition. A prolonged price war, for instance, in the auto sector, has taken a toll on major automakers' financial metrics. 

Producer price deflation in China has persisted for almost three years, hurting profits of manufacturers who also have to weather weak consumer confidence and uncertainties stemming from US trade policies. 

The consumer price index was down 0.4 per cent last month from a year earlier, NBS data showed, worse than the Reuters poll forecast of a 0.2 per cent dip. Prices were unchanged in July. 

Food prices fell 4.3 per cent, compared with a 1.6 per cent decline the previous month. 

Weak consumer demand has weighed on China's economic growth as the property market downturn persists and US tariffs squeeze exports. 

Customs data released earlier this week showed China's export growth slowed to a six-month low in August as a brief boost from a tariff truce with the US faded. 

On a monthly basis, CPI was unchanged versus a 0.4 per cent increase in July, slower than economists' forecast for a 0.1 per cent uptick. 

Core inflation, which excludes volatile food and fuel prices, was up 0.9 per cent in August from a year earlier, quickening from July's 0.8 per cent rise and the highest in 2-1/2 years. 

Policymakers have repeatedly pledged to boost consumption and in August rolled out interest subsidy schemes for individual borrowers of consumer loans as well as businesses in eight consumer service sectors including catering and tourism, in a bid to spur borrowing and spending. 

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