Chinese Consumer Inflation Cools Boosting Chances For Further Easing

Beijing, China

Asian stocks rose to a 3 month highs on Thursday after the latest Chinese data revealed that China’s consumer inflation fell to 1.8 percent in July,  down from 2.2 percent in June, bolstering the chances for further monetary easing measures by China’s central bank in the days ahead.

Retail sales, a growing segment of the Chinese economy, lowered to 13.1 percent, below the forecast of 13.7 percent.

Industrial production grew 9.2 percent in July, the weakest level in more than three years, missing analysts’ estimates of 9.7 percent and providing further evidence that China’s economy is in some need of boosting by their central bank to help spur growth and contain a slowdown in exports to Europe.

“I think there is a sense here that we need to add more stimulus to offset further weakness that is likely to come in the coming months in Europe” Frederick Neumann, HSBC Senior Economist and Co-Chair of Asian Economics, told host Mark Barton on Bloomberg’s Countdown.

Neumann said that the Chinese economy is gradually improving and the bottom has passed. However, he signalled that there are still export down side risks.

Tom Elliott, global strategist at JP Morgan Asset Management, also weighed in about the possibility for more easing by China’s central bank. “I think we’re going to see more stimulation coming through. I think this is mainly due to weak export growth, particularly in Europe” he said on Bloomberg’s Countdown.

Japan

While speculation is building for further monetary stimulus in the Chinese economy, the Bank of Japan on Thursday refused to add any further stimulus measures in Japan, even after the country’s disappointing machinery orders for June.  

The Bank of Japan maintained its benchmark interest rate between zero and 0.1 percent.

South Korea also kept its interest rates unchanged.

 

 

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