Photo: Wikipedia Commons
Photo: Wikipedia Commons
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China inflation at bay as producer price eases

Chinese consumer prices rose at a subdued pace for a second month in March. Ex-factory gate producer prices also receded after hitting an eight-year high in February.

Chinese consumer prices rose at a subdued pace for a second month in March, held back by cheap food, clothing and other manufactured goods. Ex-factory gate producer prices also receded after hitting an eight-year high in February.

China’s Consumer Price Index (CPI) grew 0.9% on-year, while the Producer Price Index (PPI) grew 7.6%, the National Bureau of Statistics said on Wednesday.

The inflation figures came in broadly in line with median estimations of 1% for CPI and 7.5% for PPI, according to economists polled by Bloomberg.

Liu Xuezhi, a senior researcher at the Bank of Communications’ Financial Research Center, told the China Securities Journal prior to the official report: “Declining food prices and smaller gains for travel and clothing-related items are believed to be the key reasons for the low CPI reading in March.”

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When food is taken out of the equation, however, China’s inflation remains on a climb. Non-food CPI gained marginally to 2.3% in March, putting the first quarter reading also at 2.3%, or almost a whole percentage point higher than 2016’s full-year reading of 1.4%, led by significant jumps in the prices of services such as education and leisure, housing and healthcare.

Consumer inflation had slumped to 0.8% in February due to a sharp drop in food prices following the Lunar New Year celebrations. The number was substantially lower than the 2.5% growth in January. Beijing has targeted inflation of 3% for 2017.

Over on the producer level, the PPI increased 7.6% in March from a year earlier, dropping slightly from the 7.8% increase in February. However, input-side PPI edged higher to 10.0% from its previous record of 9.9%. The divergent development signifies that the issue of high input cost pressure is lingering, a net negative for margins especially for mid-to-downstream manufacturers.

Similar to previous months, gains in the PPI were most acute in various heavy industries, led by a 33.7% increase in the overall mining sector. The petroleum exploration, steelmaking, and non-ferrous metal smelting sectors saw selling prices rising 68.5%, 36.8%, and 17.3%, respectively.

On a month-on-month basis, the PPI rose just 0.3%, the slowest pace in eight months.

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