Consumer inflation continues to rise in August

Huang Yixuan
Market prices rose 2.8 percent year on year last month, led mostly by a spike in pork and other food costs. Producer prices edge lower during same period.
Huang Yixuan

China's consumer inflation continued to rise in August amid higher pork prices, while factory-gate inflation still declined.

The Consumer Price Index, a main gauge of inflation, jumped 2.8 percent year on year last month, the same pace as July, the National Bureau of Statistics said on Tuesday.

The higher headline CPI figure was partly led by surging pork prices, which registered a jump of 46.7 percent in August from a year earlier, 19.7 percentage points faster than the previous month.

Food prices soared 10 percent year on year, 0.9 percentage points higher than the previous month, leading to a 1.93-points rise in the overall CPI, according to the bureau.

In addition to pork, fresh fruit prices rose 24 percent, 15.1 percentage points slower than July, while prices for beef, mutton and chicken all posted increases between 11.6 percent and 12.5 percent year on year. These five together contributed 1.66 percent to the headline CPI growth.

"As a result of the spike in pork prices, there has been a spill-over effect on other food items, leading to broad-based food inflation. Chinese residents have sought other food items such as beef or mutton as protein substitutes, causing their prices to advance in recent months as well," said Xing Zhaopeng, China markets economist and Raymond Yeung, chief China economist of the Australia and New Zealand Banking Group.

Fresh vegetable prices, however, retreated 0.8 percent; the first decline after rising for 18 consecutive months.

Non-food prices, meanwhile , grew 1.1 percent, 0.2 percentage points slower than July, contributing 0.91 percentage points to headline CPI growth.

Prices in the education, culture and entertainment sector, health care and housing rose by 2.1 percent, 2.3 percent and 1 percent, respectively.

On a month-on-month basis, the headline CPI edged up by 0.7 percent, up 0.3 percentage points from the pace in July.

Food prices surged by 3.2 percent in general, compared with the 0.9 percent rise in the previous month. 

The supply of pork continued to get tighter, with prices soaring 23.1 percent from a month earlier, 15.3 percentage points higher than the rise in July, leading to a 0.62 percent increase in the overall CPI figure, according to Shen Yun, senior statistician at the NBS.

Due to the upcoming Mid-Autumn Festival and the effect of substitution in consumption, prices for eggs, beef, mutton, chicken and duck saw increases between 2 percent and 5.9 percent month on month.

Vegetable prices posted a 2.8 percent month-on-month rise on account of a recent typhoon and the hot weather, Shen said, while fruit prices dropped by 10.1 percent as a large number of fresh fruits were on the market.

The Producer Price Index, which measures the cost of goods at the factory gate, fell 0.8 percent year on year in August, compared with a 0.3 percent drop in July, and "the negative trend will likely extend before the year end" according to the ANZ Group.

PPI inflation in the oil and natural gas extraction industries fell by 9.1 percent year on year, further extending the decline by 0.8 percentage points from the previous month. PPI inflation also fell further in fuel processing and ferrous metal processing industries.

In month-on-month terms, PPI retreated by 0.1 percent, narrowing from a 0.2 percent drop in July, which may be mainly affected by the supply side, according to Li Chao, chief economist at Huatai Securities.

Looking ahead, the China International Capital Corporation expected a further CPI increase in September, while the PPI figure is estimated to remain in negative territory in the short term.

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