THE country’s producer inflation cooled in August amid softening domestic demand, pointing to a steady slowing in growth in the world’s second-biggest economy as it confronts heightened risks to the outlook from a heated trade dispute with the United States.

Consumer inflation, on the other hand, picked up more than expected in August, though policymakers are likely to stay focused on growth as U.S. President Donald Trump raises the stakes in the tariff war.

The producer price index (PPI), a gauge of industrial profitability, rose 4.1 percent in August from a year earlier, compared with a 4.6-percent increase in July, according to data released by the National Statistics Bureau yesterday.

Analysts polled previously had expected August PPI would rose to 4 percent. On a monthly basis, PPP picked up from 0.1 percent in July to 0.4 percent in August.

Raw material prices rose 7.8 percent in August from a year earlier, compared with a 9.0-percent increase in July.

“Despite soft industrial output in the third quarter, domestic polices such as boosting infrastructure spending could provide some support to prices of related industrial goods in the fourth quarter,” said Betty Wang, Hong Kong-based senior China economist at ANZ, noting that month-on-month PPI growth has been picking up.

China’s economic growth cooled slightly to 6.7 percent in the second quarter of the year, though worries about a sharper slowdown have increased in recent months amid rocky trade relations with the United States.

On a year-on-year basis, the consumer price index (CPI) rose 2.3 percent in August, fastest pace since February this year and above expectations of 2.2 percent. It also accelerated from July’s 2.1 percent.

The food price index climbed 1.7 percent from a year earlier as vegetable prices rose and pork prices rebounded, while non-food prices grew 2.5 percent in August.

On a month-on-month basis, the CPI increased 0.7 percent.

Since August, China has reported multiple African swine fever (ASF) outbreaks that have pushed up pork prices in the country’s south as demand grows ahead of a week-long holiday in October and also raised the prospect of more imports.

However, analysts say that while ASF has increased the upside risk to the inflation outlook, the impact would most likely be small.

“Improvements in China’s disease management and pork’s lower CPI weighting these days suggest that any pickup in inflation this time around would be more moderate,” said Liu Chang, a London-based China economist at Capital Economics.

China has set an inflation goal of 3 percent for 2018, same as last year. The core consumer price index, which strips out volatile food and energy prices, rose 2 percent in August, compared with 1.9 percent in July.

(SD-Agencies)