China’s consumer price index, a main gauge of inflation, rebounded for the third consecutive months and hit the second highest record within this year in August due to carryover effect. Industry insiders believed that food prices are not likely to continue to rise and inflation is still controllable in the future.
According to the latest statistics released by the National Bureau of Statistics (NBS), the CPI rose 2.3 percent year on year in August, up from 2.1 percent in the previous month; and it hiked by 0.7 percent from July, presenting 0.4 percentage points higher than the growth in the previous month.
NBS statistician Sheng Guoqing attributed the increase in CPI on a yearly and monthly basis to higher food prices in August. It saw growth at 2.0 percent on average during January and August, keeping flat with that in January-July period.
Specifically, food prices moved up by 1.7 percent, contributing about 0.33 percentage points to CPI growth. Prices of eggs, vegetables and fresh fruits gained by 10.3 percent, 4.3 percent and 5.5 percent, respectively, which totally contributed about 0.25 percentage points to CPI growth. Pork price dropped by 4.9 percent, less decline from previous month, and its influence on CPI decrease also fell by around 0.12 percentage points. Non-food prices gained by 2.5 percent, making a contribution of about 1.98 percentage points to CPI rise.
Core CPI excluding food and energy edged up by 0.1 percentage points to 2 percent, no signals indicating faster growth, according to Zhang June, chief economist with Morgan Stanley Huaxin Securities. Weather-inductive fluctuation in vegetables price won’t go on, while pig epidemic will hardly exert essential impact on supply of pork. Given to this, it is unnecessary to worry much about inflation.
Li Ping, chief economist of financial research center at Bank of Communications, also held the same opinion. He thought that food price won’t continue to hike as seasonal effect weakens. It is predicted that pork price may recover but won’t rise significantly. With real estate regulation policy taking effect, house rent won’t tend to rise across the country, imposing limited influence on commodity prices. As a result, CPI won’t keep climbing but will see a stable growth.
Statistics also showed that although producer price index (PPI) picked up by 4.1 percent year on year in August, the growth was 0.5 percentage points lower than that of previous month.
Ferrous metal smelting and rolling processing industries saw expanding increase. Growth in petroleum, coal and other fuel processing industries also enlarged by 1.6 percentage points and 0.8 percentage points, respectively. Prices of producing chemical raw material and chemical products stopped decline to increase by 0.6 percent. Prices of ferrous metal smelting and rolling processing industries moved down by 0.1 percentage points, 1.5 percentage points lower than the decline in previous month.
Zhang said that after macro-policy is adjusted, more easing and proactive monetary and fiscal policies will focus more on supporting infrastructure investment or boosting demand for raw material and engineering machinery equipment. Therefore, PPI may still see slower decrease in the second half of the year. If adjustment is better than expectation, it will have chance to rebound slightly in some months.
In the opinion of Lian, there’s no stimulus for prices of international commodities and crude oil to continue to rise, which hence won’t drive up PPI remarkably. Renminbi won’t continue to depreciate a lot against the US dollar as there’s little possibility for depreciation to bring introduced inflation. Carryover effect won’t push up PPI drastically as it will weaken a lot after August. Moderate rise in demand and monetary supply may stimulate prices, particularly prices of industrial products relevant with infrastructure sector. Investors should pay attention to this.
Translated by Vanessa Chan
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