Inflation building a head of steam in China
Sharp drop in vegetables and eggs depressed headline CPI to 0.8%, but pressure continues to build in the core, while PPI beat forecasts with 7.8% gain
Despite a substantial pullback in China’s headline Consumer Price Index in February to just a 0.8% increase, price pressure continues to build as the Producer Price Index beat expectations with a strong 7.8% gain.
The CPI added 2.5% in January and economists were looking for a 1.7% gain last month.
February’s Producer Price Index rose a robust 7.8% from January’s already-high 6.9%. The expectations for PPI was a 7.7% gain on the higher cost of coal, crude oil, iron ore and other imported commodities as seen in the latest foreign trade report released on Wednesday by the Customs department.
Imported inflation is now a top concern for China’s state planner, the National Development and Reform Commission (NDRC), which holds the power to set and adjust the prices of certain key economic influencers, including retail gasoline prices.
A vice chairman of the NDRC remarked in a recent briefing that higher price pressures imported from abroad could escalate depending on the trend of various bulk commodities, crude oil.
The surprising slump in CPI was due to a sharp drop in fresh food prices due to warmer weather this year and the end of China’s holiday season, the National Bureau of Statistics said. They reaffirmed that upward inflationary trend has not changed course.
China’s latest non-food CPI, at 2.2%, remains significantly higher than 2016’s full-year reading of 1.4%, driven by persistent increases in housing, medical and fuel expenses.
Imputed rent was a notable gainer, with 0.6% month-over-month increase making the housing component of consumer inflation 3.3% higher from a year ago.
Medical inflation is now at 5.1%, up from 3.8% for 2016.