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Consumer prices rise just 2.6% as food costs play a major role
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China’s consumer inflation growth eased in August, paving the way for the central government to adjust its policies to further bolster economic expansion.
The Consumer Price Index, the main gauge of inflation, rose 2.6 percent from a year earlier last month, the National Bureau of Statistics said yesterday. June and July saw 2.7 percent increases.
The government has set a target of 3.5 percent for the year.
Food costs, which account for almost a third of the CPI Basket, rose 4.7 percent in August, compared to July’s 5 percent rise, and contributed most to the slower CPI growth.
Chang Jian, a Barclays economist, said the figures indicated that inflation was less of an immediate concern.
“But we expect the prices to be on a general, mild uptrend in the second half due in part to base effects as well as higher pork and commodity prices,” Chang said.
“We continue to expect prudent monetary policy with a slight bias toward tighter liquidity, as measured by total social financing, especially as economic growth starts to show signs of stabilization.”
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the headline CPI inflation growth may accelerate in coming months due to floods in northeast and southChina.
“But they won’t be sharp increases because weather effects are diminishing as floodwaters continued to recede in the past week,” Zhou said, adding China’s CPI inflation was unlikely to exceed 3 percent this year.
The Producer Price Index, which tracks factory-gate inflation, dropped 1.6 percent year on year last month, narrowing from the 2.3 percent decline in July, according to the statistics bureau.
“As long as PPI inflation remains negative, there is little pass-through effect to CPI inflation,” Zhou said.
China’s gross domestic product expanded 7.5 percent from a year earlier in the second quarter, and the economy exhibited signs of stabilization in the past two months with industrial production, fixed-asset investment, retail sales and foreign direct investment in July all turning out to be better than expected.
Export growth accelerated to 7.2 percent in August, up from July’s gain of 5.1 percent. The strengthened performance was in part due to supportive measures, including tax reduction for small companies, more investment in railway and other infrastructure construction as well as less red tape for exporters.
JPMorgan has revised its projection of third-quarter growth to 7.6 percent year on year, bringing the whole year expectation to 7.6 percent, up from 7.4 percent.
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