CPI posts slight rise in June as food costs up
CHINA’S consumer inflation rose slightly faster in June amid higher food prices.
The Consumer Price Index, a main gauge of inflation, rose 1.9 percent year on year in June, faster than the 1.8 percent annual growth in May, the National Bureau of Statistics said yesterday.
On a monthly basis, the CPI dipped by 0.1 percent in June, and this dip was 0.1 percentage point slower from May.
Sheng Guoqing, the bureau’s senior statistician, cited the faster consumer inflation to a 0.3 percent rise in food prices, which lifted CPI growth by 0.05 percentage points.
Prices of eggs and vegetables surged 17.1 percent and 9.3 percent respectively to add 0.27 percent to CPI growth, while pork and fruit prices fell 12.8 percent and 5.3 percent year on year respectively.
Non-food price inflation was flat from May at 2.2 percent year on year, the bureau said.
Monthly food price inflation added 0.5 percentage points to a negative 0.8 percent, from its recent low of negative 4.2 percent in March.
Pork prices rose after falling for three straight months, up 1.1 percent in June from May, lifting the month-on-month CPI growth by 0.02 percentage points.
“The steady trend of CPI indicated moderate inflation, providing a good environment for policy regulation,” said Lian Ping, chief economist of the Bank of Communications.
Lian predicted pork prices to rebound in the third and fourth quarters, which may lift food prices slightly.
More costly services will continue to support the headline CPI, according to the Australia and New Zealand Banking Group.
The services sector saw costs rise 2.7 percent annually in the first half of the year, with prices in education, tourism, and health care up 2.7 percent, 3.3 percent, and 6.4 percent respectively.
“The uptrend will continue, in our view, as demand for services will remain strong,” said David Qu, markets economist of ANZ Group.
The Producer Price Index, which measures costs of goods at the factory gate, rose by a stronger-than-expected 4.7 percent year on year, up 0.6 percentage points from the May figure to a six-month high.
By industry, PPI inflation rose markedly in petroleum and natural gas extraction, petroleum and coal processing, ferrous metal processing, nonferrous metal processing, chemical material and products, and coal mining.
These industries together contributed an increase of 0.49 percentage points to the year-on-year headline number, data from the bureau showed.
Prices of oil and natural gas prices rose 32.7 percent year on year in June, and for the first half of the year they have risen 17 percent from the same period last year.
“With Brent crude futures surging 66 percent to US$78 from US$47 over the past 12 months, we expect domestic fuel prices in China to continue to accelerate, which will exert further upward pressure on the PPI,” Qu said.
On a monthly basis, PPI inflation dipped 0.1 percentage point to 0.3 percent in June.
“Looking ahead, we expect PPI inflation to fall in the second half of the year from a high base in the same period of 2017, a stable oil price and weakening end-demand, and CPI inflation to stay at a subdued 2 percent as household purchasing power is hit by a rising debt burden,” said Lu Ting, Nomura’s economist.
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