August sees cooling in consumer inflation

China's consumer inflation cooled in August, while factory-gate prices continued to fall year on year but at a slower pace than in July.

The Consumer Price Index, a main gauge of inflation, rose 2.4 percent last month from a year earlier, 0.3 percentage points slower than that in July, the National Bureau of Statistics said on Wednesday. 

The Chinese market generally ran in an orderly manner last month, as authorities had made efforts in epidemic prevention and control as well as promoting economic and social development. They had also implemented policies and measures to ensure market supply and stable prices, said Dong Lijuan, a senior statistician at the bureau.

Food prices rose 11.2 percent year on year in August, down 2 percentage points from July, driven mainly by the high base caused by surging pork prices last August which more than offset the continued rise in vegetable prices, Dong said.

Pork price inflation slumped to 52.6 percent year on year last month from 85.7 percent in July.

Vegetable prices rose further by 11.7 percent in August from a year earlier, compared with the 7.9 percent increase in July, partly due to flooding along the Yangtze River that affected the supply of vegetables.

Fruit and egg prices remained sluggish, down 14.4 percent and 9.7 percent year on year last month, but both narrowing from the drops of 27.7 percent and 14.5 percent in July.

Non-food price inflation, meanwhile, rebounded to 0.1 percent year on year in August from zero percent in July. 

Among them, transport and communication prices fell by 3.9 percent, compared with a 4.4 percent decline in July, “mainly led by the higher transportation-related fuel price inflation, in line with the rise in global oil price inflation,” financial services firm Nomura said.

That said, cost inflation for transport facilities moderated to post a 2.8 percent drop year on year in August from the 2.7 percent fall in July.

Excluding food and energy components, core CPI inflation remained unchanged from July at 0.5 percent year on year in August. 

“The figure returned to the lowest level since the bureau began keeping such records, indicating that domestic production has revived to the level before the pandemic, while consumer market demand still required further recovery,” said Li Qilin, chief economist of Yuekai Securities.

On a month-on-month basis, the headline CPI rose 0.4 percent in August, slower than the 0.6 percent rise in the previous month.

Food prices went up by 1.4 percent month on month in general, moderating from the 2.8 percent jump in July, contributing 0.31 percentage points to the headline CPI increase.

Pork price inflation dropped significantly to 1.2 percent in August from 10.3 percent in July, much lower than its reading in August 2019 (23.1 percent), “signaling a weakening of sequential momentum despite the continued recovery of catering businesses,” said Lu Ting, chief China economist at Nomura. 

“We caution that the base effect will remain very unfavorable in September and October, as month-on-month pork price inflation remained elevated at 19.7 percent and 20.1 percent, respectively in September and October 2019,” Lu said.

The Producer Price Index, which measures the cost of goods at the factory gate, fell 2 percent year on year in August, compared with a 2.4 percent drop in July, driven by sequentially higher prices of oil and other major raw materials.

In month-on-month terms, PPI inflation inched down to 0.3 percent in August from 0.4 percent in July, as industrial production continued to pick up; market demand extended recovery; and prices for international commodities such as crude oil, iron ore and non-ferrous metal further increased, Dong said.