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June 13, 2019

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Mounting fruit and egg prices push consumer inflation to 15-month high

CHINA’S consumer inflation extended last month’s rise to hit a 15-month high, while factory-gate inflation slowed slightly.

The Consumer Price Index, the main gauge of inflation, grew 2.7 percent in May from a year earlier, 0.2 percentage points faster than the previous month, to be the highest since February 2018 (which posted a 2.9 percent CPI increase), data from the National Bureau of statistics showed yesterday.

The advance was due to higher food price inflation which rose to 7.7 percent year on year in May from 6.1 percent in April, contributing 1.48 percentage points to the CPI increase. It was mainly driven by rising prices for fruit and eggs.

Fruit prices skyrocketed by 26.7 percent from a year earlier, 14.8 percentage points faster than the previous month, boosting the CPI rise by 0.48 percentage points. Prices for eggs also jumped 8.7 percent year on year, comparing with April’s 2.6 percent increase.

Pork prices remained largely stable in May, but year-on-year inflation rose to 18.2 percent from 14.4 percent in the previous month, owing to a low base last year.

“We believe the surge in fruit and egg prices will be short-lived and could subside in summer when supply increases, while pork prices could rise further due to a sharp decline in hog stock as a result of the spread of African swine fever,” said Lu Ting, chief China economist at Nomura.

Prices in the education, culture and entertainment sector, health care and housing rose by 2.6 percent, 2.5 percent and 1.8 percent, with the combined impact on the headline CPI rising by about 0.9 percentage points, according to the bureau.

On a month-on-month basis, the headline CPI remained flat last month, compared with a 0.1 percent growth in April.

Food prices edged up 0.2 percent in general, with a 10.1 percent month-on-month surge in fruit prices as the lower output of apples and pears last year resulted in an inventory shortage this year. Rain in the south this year was also a reason for the dwindling supply of seasonal fresh fruit, according to the bureau's Dong Yaxiu.

Pork prices, meanwhile, retreated 0.3 percent from a month earlier mainly due to weakening demand in the hot weather, Dong added.

Prices for gasoline and diesel increased by 2 percent and 2.2 percent, affected by factors including the price adjustment of refined oil, together contributing to 0.04 percentage points in overall CPI growth.

The Producer Price Index, which measures the cost of goods at the factory gate, rose 0.3 percent year on year in May, 0.3 percentage points slower than the previous month, “due mainly to a high base and falling oil prices,” according to Nomura.

In month-on-month terms, PPI inflation also moderated to 0.2 percent in May from 0.3 percent in April, reflecting weaker domestic demand, Lu said.

Among upstream sectors, PPI inflation in the mining sector rose to 6.1 percent year on year in May from 5.3 percent in April, while that in the raw materials and processing sectors cooled to post a 0.6 percent decline and a 0.5 percent increase, in May, comparing with the zero percent and 0.9 percent rise in April.

PPI inflation broadly dropped among major industries, with price inflation falling significantly in oil and natural gas extraction industries, fuel processing and ferrous metal processing.


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