China inflation hits highest level in 15 months

The consumer price index hit 2.7 percent in May, China’s National Bureau of Statistics said. (AFP)
Updated 12 June 2019
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China inflation hits highest level in 15 months

  • The consumer price index hit 2.7 percent in May compared with 2.5 percent a month earlier
  • The rise was ‘largely the result of renewed acceleration in food price inflation’

BEIJING: Inflation in China rose to its highest level in more than a year in May driven by surges in prices due to the African swine fever epidemic and bad weather, official data showed Wednesday.
But while prices are increasing, demand remains weak because of the trade war with the United States and economic uncertainty.
The consumer price index (CPI) — a key gauge of retail inflation — hit 2.7 percent, the National Bureau of Statistics (NBS) said, compared with 2.5 percent in April and the highest since February 2018.
The data was in line with a forecast of analysts polled by Bloomberg News.
The rise was “largely the result of renewed acceleration in food price inflation,” and supply disruptions caused by African swine fever, Capital Economics said in a note.
Beijing’s official statistics say around one million pigs have been killed since the first outbreak in August — but that is widely considered to be an underestimate.
The producer price index (PPI), an important indicator of domestic demand, hit 0.6 percent in May, from 0.9 percent the previous month.
Economic “growth could slow further on escalating US-China trade tensions,” Nomura International said in a note.
“We expect Beijing to undertake further easing/stimulus measures to bolster confidence and to stabilize growth.”
US President Donald Trump is expected to meet China’s Xi Jinping at the G20 summit in Japan this month to discuss the long-running trade row, but US Commerce Secretary Wilbur Ross has warned that it will not be a stage for a “definitive agreement.”


Lufthansa profit warning spooks European airline sector

Updated 59 min 26 sec ago
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Lufthansa profit warning spooks European airline sector

  • Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called ‘attritional fare wars’

FRANKFURT: Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between €2 billion and €2.4 billion, down from the previously targeted €2.4 billion to €3 billion.
“Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning.
“The group expects the European market to remain challenging at least for the remainder of 2019,” it said.
It also pointed to high jet fuel costs, which it said could exceed last year’s figure by €550 million, despite a recent fall in crude oil prices.
Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called “attritional fare wars” and said four or five European airlines were likely to emerge as the winners in the sector.
“No signs that anyone is prepared to reduce capacity, therefore we would anticipate the wave of consolidation in European short haul is not over,” said analyst Neil Wilson, analyst at London-based broker market.com.
Earlier this month global airlines slashed a widely watched industry profit forecast by 21 percent as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
Lufthansa’s problems are centered on its European business, with a more positive outlook for its long-haul operations, especially on transatlantic and Asian routes.
Eurowings management is due to implement turnaround measures to be presented shortly, Lufthansa said, adding that efforts to reduce costs had so far been slower than expected.
Lufthansa’s adjusted margin for earnings before interest and tax (EBIT) was forecast between 5.5 percent and 6.5 percent, down from 6.5 percent to 8 percent previously, it said in a statement.
Lufthansa also said it would make a €340 million provision for in its first-half accounts, relating to a tax matter in Germany originating in the years between 2001 and 2005.