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China Price Growth Accelerates; Factory Gate Inflation Slows

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China's inflation accelerated on higher food and non-food prices, but remained well within the government's target and producer price inflation slowed in July, giving space for monetary policy adjustment.

Consumer price inflation rose to 2.1 percent in July from 1.9 percent in June, data from the National Bureau of Statistics showed Thursday.

A similar higher rate was last seen in March. The rate was forecast to rise marginally to 2.1 percent.

Nonetheless, inflation remains well below the government's full year-target of around 3 percent.

Core inflation excluding volatile food and energy prices held steady at 1.9 percent in July.

Food prices rose 0.5 percent, faster than the 0.3 percent rise in June. Likewise, growth in non-food prices increased to 2.4 percent from 2.2 percent.

Month-on-month, consumer prices rose 0.3 percent, in contrast to a 0.1 percent drop in June. This was the first increase in five months.

Meanwhile, producer price inflation eased slightly to 4.6 percent from 4.7 percent in June, another report from NBS showed. The annual increase was slower than the expected 4.5 percent.

On a monthly basis, producer prices gained 0.1 percent after rising 0.3 percent.

Julian Evans-Pritchard, an economist at Capital Economics, said the big picture is that inflation on both measures is set to cool during the coming quarters as China's economy slows and commodity prices fall. This should give the People's Bank plenty of room to further loosen monetary policy, the economist added.

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