Rising pork prices push up inflation rate
Print Edition
CHINA’S inflation rate increased for a second straight month in July, mainly due to rising food prices, the National Bureau of Statistics said yesterday.
The consumer price index (CPI) rose 1.6 percent year on year in the month, accelerating from 1.4 percent in June and its highest rate since last October.
Food prices, which account for nearly a third of the CPI basket, rose 2.7 percent in July, picking up from 1.9 percent in June and 1.6 percent in May. The cost of fresh vegetables jumped 10.5 percent.
Senior bureau statistician Yu Qiumei said the CPI rise over the past few months was mainly on the back of a surge in pork prices.
Yu said the price of the staple meat, which rose by 16.7 percent in July is one of the most important factors the bureau considers when formulating the CPI.
Before the increase, pork prices had continuously declined over the past two years, hitting the profits of pig farmers who, in order to mitigate losses, cut down on the number of livestock they raised, Xinhua news agency reported.
In the non-food sector, prices edged up 1.1 percent, slowing from 1.2 percent in June.
Yu described the consumer price growth helped to disperse some of the deflationary pressure that indicated weak domestic demand and put economic growth at risk.
“Rising prices will help strengthen people’s confidence in production,” he said, adding that consumer spending has risen during the summer holiday due to increased expenditure on travel and entertainment.
Despite the confidence boost from the CPI, deflationary pressure remains, the statistics bureau said.
The producer price index — a measure of inflation at the factory gate and a pointer to future retail prices — fell 5.4 percent in July, after dropping 4.8 percent in June and extending the downward trend for a 40th straight month.
Liu Ligang, an economist at Australia & New Zealand Banking Group, said that despite the higher consumer prices, it is clear that deflationary risks remain and that the government should maintain its relaxed monetary policy stance.
“While the headline CPI will likely head moderately higher in the second half of the year, the non-food sector will remain subdued on the back of sluggish domestic demand,” he said. “China’s growth in the first half was largely driven by surging revenues in the financial sector thanks to a booming stock market.”
Maintaining that momentum will be a challenge amid the deleveraging process within the financial system,” he said.
China’s gross domestic product rose 7 percent in the first six months, in line with the government’s full-year target of “about 7 percent.”
Despite the People’s Bank of China’s efforts to bolster the economy — it has cut interest rates four times and lenders’ reserve requirement ratio three times since November — the outlook remains gloomy.
On Saturday, the General Administration of Customs said China’s foreign trade fell 8.8 percent in July, much worse than expected, as exports dropped 8.9 percent and imports lost 8.6 percent.
The dip was attributed to a high comparative base from last year combined with a weaker-than-expected recovery in external demand.
Activity in the manufacturing sector also slid in July, with the official purchasing managers index, which focuses mostly on companies in the public sector, falling to 50, from 50.2 in June, while the Caixin PMI, the equivalent gauge for the private sector, slumped to a two-year low of 47.8.
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