The National Bureau of Statistics (NBS) will unveil China's consumer price index (CPI) and producer price index (PPI) in June on July 10. Multiple institutions estimate that dragged by the price fall of food and industrial products, the CPI in June might drop below 2 percent.The statistics released by the Ministry of Commerce (MOFCOM) on June 28 showed that on a weekly basis, the average price of 30 kinds of vegetables lowered by 1.7 percent. The price of poultry and eggs further reduced with the price of eggs and chicken killed dropping 1.7 percent and 0.6 percent, respectively. Edible oil saw slight price drop with the price of soya-bean oil, rap oil and peanut oil declining 0.3 percent, 0.1 percent and 0.1 percent, respectively. Grains saw stable price on the whole. The average price of six kinds of fruits lowered 0.2 percent. The price of meats saw small fluctuation with pork down 1.0 percent, beef up 0.1 percent and mutton down 0.1 percent.
Li Huaijun, analyst with First Capital Securities, indicated that signs show that pork price might peak and then fall in June, but the average pork price in the first three weeks of June still beat that in May, recording a month-on-month surge of 0.9 percent and well below the 3.1 percent recorded in the same period of 2015. Considering that pork price now reaches the highest level since 2009, signs show that pork price might peak and then fall in June, and pork consumption usually slacks in July and August, a great surge is unlikely to repeat.
“On a yearly basis, the CPI in June is expected to grow 1.9 percent. Food price will see a surge of 5.2 percentage points, while non-food price will grow by 1.0 percentage point. While on a monthly basis, the CPI in June will decline 0.1 percent. The PPI in June is expected to decline 2.7 percent year on year”, as Li indicated.
Xu Gao, chief economist at China Everbright Securities, indicated during the interview with the Securities Daily that the further month-on-month decline of pork price showed that the improvement on the supply side starts to curb price hike. Considering that base effect strengthens, pork price will see continuous drop year on year. The price of vegetable further dropped 2.5 percentage points from last month to 5.2 percent in last week. The year-on-year price drop of food will drive year-on-year growth of CPI to slow down.
“The price of industrial products further dropped 0.2 percentage points from previous week to a month-on-month drop of 0.2 percentage points in last week. As demands see increasing uncertainties, further price decline weighs on industrial products”, as indicated by Xu.
Ren Zeping, chief economist at Guotai Junan Securities, indicated during the interview with the Securities Daily that the Brexit vote and stronger dollar give rise to the drop of commodity prices. What’s more, sluggish domestic demand might recover and inflationary pressure eases. Ren still believed that domestic inflation has peaked, and the CPI in June might drop below 2 percent.
“Under the backdrop of economic retreat, peaked inflation, Europe might expand easing policies and etc., the space left for monetary policies will be wider. Unlike the active injection of liquidity during 2014 and 2015, easing policies in the future will be more under compulsion”, as Ren remarked.
Translated by Jennifer
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