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September 11, 2017

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Home » Business » Economy

China’s CPI and PPI rise amid increasing costs

Source: Xinhua | 00:01 UTC+8 September 11, 2017 | Print Edition

CHINA’S consumer inflation picked up in August, driven by higher food prices, while the factory-gate prices also rose, fueled by rising commodity costs.

The consumer price index, a main gauge of inflation, accelerated more than expected to a seven-month high of 1.8 percent in August, up from July’s 1.4 percent, beating market expectations of 1.6 percent, according to data released by the National Bureau of Statistics on Saturday.

For the first eight months of the year, CPI climbed 1.5 percent from a year ago.

The stronger, yet still moderate, inflation remained well below the government’s annual inflation regulation target of around 3 percent for 2017.

On a monthly basis, CPI added 0.4 percent last month.

The bureau’s chief statistician, Sheng Guoqing, attributed the faster CPI growth to higher food prices as adverse weather pushed up vegetable prices while falling output led to sharp growth in egg prices.

Food prices, the biggest component of the CPI, rose 1.2 percent month on month, the bureau said.

Vegetable prices rose 8.5 percent from July as scorching summer and widespread heavy rains fueled transport costs. Egg prices climbed 13.5 percent from July while the prices of pork, a staple meat in China, rose 1.3 percent month on month.

Year on year, food prices dipped 0.2 percent in August, while non-food prices gained 2.3 percent.

Excluding volatile food and energy prices, the core CPI increased 2.2 percent year on year in August, up slightly from July’s 2.1 percent. The core CPI has been holding steady at a little above 2 percent since March.

Analysts said the pick-up in consumer inflation is unlikely to continue because of a high comparative base in September 2016 and the fading effects of seasonal factors during the rest of the year.

Jiang Chao, chief economist at Haitong Securities, said the CPI increase would ease to 1.6 percent in September and remain subdued for the whole year.

The producer price index, which measures costs of goods at the factory gate, rose to a four-month high of 6.3 percent in August, from 5.5 percent in July, the bureau said.

PPI growth, which was higher than the market forecast of 5.7 percent, was boosted by increases in the prices of steel, non-ferrous metals, as well as oil and natural gas.

On a month-on-month basis, the index added 0.9 percent last month.

Producer prices accelerated upward, a significant positive indicator for China’s economy, which will help drive profits higher and enable companies to process their debt burden a little more easily, Bloomberg chief Asia economist Tom Orlik said.

However, Orlik said factory sector reflation remained vulnerable. The sector breakdown showed factory reflation was benefiting mainly upstream industries, with downstream industries squeezed.

PPI grew 6.4 percent year on year for January-August, flat from that in the first seven months.

Orlik said the central bank would continue dealing with deleveraging challenge, not hastening monetary easing.

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