China’s CPI reaches 17-month high at 2.8 percent in July

By Li Xuanmin Source:Global Times Published: 2019/8/9 11:57:42

China's consumer price index (CPI), a main gauge of inflation, rose 2.8 percent year-on-year in July, marking a 17-month high, mainly due to a rise in food prices such as those of pork and fruits, data from the National Bureau of Statistics (NBS) showed on Friday. 

While pork prices may continue to soar in the second half due to African swine fever outbreak, non-food prices gain will continue to ease, industry insiders said. Such structural difference means that the space for a further CPI climb to the 3-percent-inflation separation line is limited and China won't experience an inflation risk this year.

This marked the fifth consecutive month that China's CPI went above 2 percent. It also marked the highest CPI since March 2018. In June, the CPI rose 2.7 percent.

In breakdown, food prices rose 9.1 percent year-on-year in July, accelerating 0.8 percentage points from June, according to a statement on the NBS website. Pork prices increased 27 percent year-on-year, 5.9 percentage points higher than the previous month. Fruit prices soared 39.1 percent year-on-year, down 3.6 percentage points from the previous month.

Non-food prices gained 1.3 percent year-on-year in July, 0.1 percentage points down from June.

Industry observers noted that the surge in CPI was mainly driven by certain food price gains, notably the price of pork. "But there is a diversification in the price of different goods, as we see non-food price gains narrowed down. So the price for overall consumption goods will still remain overall stable for the second half," Liu Xuezhi, an economist at the Bank of Communications, told the Global Times on Friday.

The yuan's exchange rate breached the psychological level of 7 against the US dollar this week, which may weight on CPI upsurge, analysts said. China set the official mid-point reference for the yuan at 7.0136 on Friday, the second day that the rate was weaker than 7 per US dollar since 2008. The first was on Thursday.

But as consumer price is mostly determined by domestic supply and demand, the impact of the yuan's depreciation on CPI is "controllable," Liu added. 

"There may be some mild gains in the short term, but taking into account China's healthy and sound economy, we won't see CPI breaching 3 percent this year," Liu noted.

China's producer price index (PPI), a gauge of corporate profitability, declined 0.3 percent in July from a year ago, amid a China-US trade war escalation and weaker demand at home, marking the first time the PPI has fallen in three years, NBS data showed. It also compared with a no-growth in June and a 0.6-percent growth in May.

In a bid to stabilize PPI, analysts expect the Chinese government to launch more stimulating policies in the second half to shore up demands in manufacturing and infrastructure sectors.  

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