China's CPI rises while producer prices ease in August

BEIJING • China's consumer inflation rose for a third month in August while producer prices eased.

The consumer price index (CPI) rose 2.3 per cent from a year earlier, compared with a projected 2.1 per cent increase in a Bloomberg survey of economists, which was also the reading in July.

The producer price index climbed 4.1 per cent, compared with a 4 per cent estimate and a 4.6 per cent gain the previous month.

Spreading swine fever, floods in a key vegetable-producing region and soaring rents in big cities all have economists concerned about rising inflation risks amid the slowing economy, although the CPI still remains well below the government ceiling of 3 per cent.

The situation is undesirable for corporate China, as profits can be eroded by a slowdown in factory-gate prices while costs would rise with the consumer gauge.

More expensive pork due to the swine fever, rising oil prices on a strong US dollar, and increasing tourism costs during the summer have all lifted consumer prices, said ABCI Securities economist Yao Shaohua. "The CPI increase will remain slightly above 2 per cent in the next few months. That's a comfortable level that wouldn't affect the monetary policy."

Food prices rose 1.7 per cent last month, much faster than the 0.5 per cent increase in July, according to a statement from the statistics bureau. Food, alcohol and tobacco prices were up 1.9 per cent, contributing 0.55 percentage point to the overall consumer inflation.

Healthcare costs jumped 4.3 per cent, and transportation and communication costs were up 2.7 per cent.

The prices of eggs, vegetables and fruit rose 10.2 per cent, 4.3 per cent and 5.5 per cent respectively from a year earlier. The hot, rainy weather last month led to more expensive vegetables and eggs, and plagues in some locations boosted pork prices, according to the statistics bureau.

Although inflation has been muted so far this year, it is back on the radar again recently due to floods, the swine fever, skyrocketing rents in Beijing, currency depreciation, and the escalating China-United States trade tensions, which may raise prices of some key commodities like soya beans, said Nomura International's chief China economist Lu Ting in Hong Kong.

"Markets need to keep an eye on the development of the swine fever, but otherwise the inflation worries are overdone."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 11, 2018, with the headline 'China's CPI rises while producer prices ease in August'. Print Edition | Subscribe