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Inflation growth at a 1-year high
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CHINA’S inflation growth picked up for the third straight month in August to reach a one-year high mainly due to rising food prices, while its factory gate prices fell at their fastest rate in six years, the National Bureau of Statistics said yesterday.
The Consumer Price Index, the main gauge of inflation, rose 2 percent from a year earlier last month, accelerating from the pace of 1.6 percent in July and 1.4 percent in June. It was the highest since August last year and more than earlier market expectations of around 1.8 percent.
Food prices, which account for almost a third of the CPI basket, added 3.7 percent, compared to July’s 2.7 percent increase.
Fresh vegetables jumped 15.9 percent and pork and processed meat gained 9.3 percent.
Prices in the non-food sector edged up 1.1 percent, the same as July.
Yu Qiumei, a researcher at the bureau, said the rise in consumer prices, which helped to disperse some deflationary pressure, was still within a reasonable range.
“Food prices increased rapidly. It was in part a result of last month’s extreme weather that disrupted the production and transport of fresh vegetables and other food,” Yu said.
Deflationary pressure still existed, Yu said, as the Producer Price Index, the factory-gate measurement of inflation and a harbinger for future prices, fell 5.9 percent in August, down further from the drop of 5.4 percent in July and extending the decrease for the 41st consecutive month.
“We are quite concerned by deepening PPI deflation,” Nomura economists said in a research note. “Month-on-month deflation has worsened in the third quarter, which is consistent with weaker growth momentum.”
The economy expanded by 7 percent in the second quarter, better than market expectations, but in the past few months, trade, industrial production, retail sales and fixed-asset investment all moderated.
Trade plummeted in August with exports dropping 6.1 percent and imports down by 14.3 percent. The official Purchasing Managers’ Index, a gauge of the operational conditions in the state-owned manufacturing sector, also retreated to 47.3 last month, pointing to contracted industrial activities for the first time in six months.
The Caixin PMI, a counterpart for private and export-oriented producers, slumped to a 76-month low of 47.3.
“China’s economy has notable weakness right now,” said Li Wei, an economist at the Commonwealth Bank of Australia. “The growth in the first half was largely driven by surging revenues in the financial sector thanks to a booming stock market. So maintaining the momentum will be a challenge amid the deleveraging process in the financial system.”
Li said the benign inflation outlook for China, which is expected to be around 1.6 percent for the whole year, will keep the door open for the country to further ease policy as needed.
In the first eight months, China’s CPI rose 1.4 percent year on year, well under the full-year target of capping it below 3 percent. The PPI contracted 4.9 percent.
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