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China's economy to continue to moderate


08:15, September 03, 2012

BEIJING - Upcoming results will show China's economy continued to weaken in August due to the government's caution in one-off stimulus plans and the sluggish recovery of the country's trading partners, a new report by the United Bank of Switzerland Limited has predicted.

The Consumer Prices Index, a main gauge of inflation, will show a rebound in August of 2 percent, up 0.2 percentage points from the previous month, driven by growth in food prices, the UBS said in its weekly report, released on Thursday.

CPI eased to 1.8 percent in July, the lowest reading over the past 30 months, in the wake of the government's price control measures. However,food prices, which account for one third of China's CPI calculation, are likely to rebound over the next few months as the weather's turning cold will affect vegetable harvests.

Meanwhile, the UBS forecast that the Producer Price Index, the inflation gauge at the wholesale level, will have fallen 3.2 percent, larger than a decrease of 2.9 percent in July and in sharp contrast with the 7.3 percent increase in the same period last year.

The decrease is likely to echo the lackluster performance of China's corporate earnings in the first half of 2012, when they were dampened by overcapacity, rising costs and shrinking demand.

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