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Shanghai's CPI rebounds as GDP weakens

Inflation in Shanghai rebounded last month while there were renewed signs of a weakening economy with a drop in trade and industrial production, and lukewarm investment.

The only bright spot was more foreign direct investment thanks to the Disneyland park project,[HK Corporate Registration] the Shanghai Statistics Bureau said yesterday.

The Consumer Price Index, the main gauge of inflation, rose 2.2 percent from a year earlier in August. It accelerated from July's 2.1 percent increase and ended a moderating streak since February.

Food costs, a third of the total basket, rose 4.8 percent, up from July's gain of 4 percent.

"The rebound of inflation is a bad thing for Shanghai when there are few signs of an economic recovery," said Li Maoyu, an analyst at Changjiang Securities Co.

Last month, Shanghai's exports fell 5.3 percent annually to US$17.4 billion and imports contracted 5.2 percent to US$19.4 billion - the first time since April that the city has reported declines in both exports and imports.

Industrial production fell 1.8 percent to 264.6 billion yuan (US$42 billion), with the drop widening again after it improved to July's cut of 0.9 percent from June's 3.5 percent.[Hong Kong Company Formation, Incorporation, Business Registration]

The city's six pillar manufacturing industries - information technology, automobile, petroleum, refined steel, machinery equipment and biomedicine - reported a decrease of 0.7 percent to 174.1 billion yuan last month.

Fixed-asset investment was similarly weak. It edged up 5.5 percent on an annual basis to 288.8 billion yuan in the first eight months, just half a point faster than the pace in the January-July period after the country sped up approvals for major investments.

"Shanghai's performance fails our expectation," said Xue Jun, an analyst at CITIC Securities Co. "The city is unlikely to reach an economic recovery anytime soon with disappointing data in almost all fronts."

The only sector to give cause for cheer was foreign investment. Overseas investors channeled a total of US$1.6 billion into Shanghai last month, up 20.9 percent from a year earlier and the second largest this year.[Hong Kong Company Formation|Hong Kong Company Registration]

Yan Jun, chief economist at the local statistics bureau, said Shanghai's economy would stabilize given its strong service sector and an improving manufacturing industry. He was also confident that the city would achieve its target of 8 percent economic growth this year.

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