China's economy performed better than expected in July with inflation stable and industrial production strengthened.
China's consumer price index, the main gauge of inflation, grew 2.7 percent from a year earlier in July, with retail sales and investment remained the same as in June, the National Bureau of Statistics announced yesterday.
Analysts said the overall economic conditions had improved and the economy performed better than expected.
It makes for a favorable policy climate for the world's second-largest economy to secure economic stability, said Zhou Hao, an economist with Australia and New Zealand Banking Group Ltd.
"Looking forward, we expect CPI inflation of 2.2 percent for August and 2.3 percent for September. It is unlikely to exceed 3 percent this year," Zhou said.
Yu Qiumei, a researcher with the statistics bureau, said China's consumer inflation had been steady over the past few months, giving the country a chance to maneuver towards an acceptable growth rate.
The component indices showed that food costs increased 5 percent, just like a month earlier, while the non-food sector rose 1.6 percent. In the first seven months, China's inflation growth stood at 2.4 percent, still below the 3.5-percent target.
The Producer Price Index, the factory-gate measurement of inflation, fell 2.3 percent in July, narrowing from a drop of 2.7 percent a month earlier.
While the inflation seemed no longer a concern, China's real business activity also strengthened, a factor that can ease market worries.
Industrial production rose 9.7 percent year on year in July, picking up from the pace of 8.9 percent in June. It was led by the steel sector, indicating that railway and property investment is warming-up.
Fixed-asset investment grew 20.1 percent to 22.17 trillion yuan (US$3.56 trillion) in the first seven months, flat from the prior reading in the first half and slightly above market expectations, the bureau's data showed.
Retail sales, an indication of China's consumer demand, edged up 13.2 percent to 1.85 trillion yuan last month, a bit slower than June's increase of 13.3 percent but higher than May's pace of 12.9 percent.
"Most of the real activity data came in better than expected," said Tang Jianwei, an economist at Bank of Communications. "They weaken the possibility of a lard landing and should facilitate the structural reform agenda in China."
China's economy has been stuck in a weak recovery, with the growth easing to 7.5 percent in the second quarter from 7.7 percent in the first three months. Supportive measures, including tax reduction for small companies, more investment in infrastructure construction and greater administrative facilitation for exporters, have been adopted to strike the balance between short-term growth stability and medium-term risk mitigation.
