All Things Newz
Business

China’s Consumer Inflation Hits Two-Year High on Pork Rally


China’s consumer prices grew faster than expected in June, partly driven by a rebound in pork prices, although the government’s Covid Zero strategy continued to depress demand. Factory-gate inflation moderated on cooling commodity prices.

Article content

(Bloomberg) — China’s consumer prices grew faster than expected in June, partly driven by a rebound in pork prices, although the government’s Covid Zero strategy continued to depress demand. Factory-gate inflation moderated on cooling commodity prices. 

Advertisement 2

Article content

Consumer prices grew 2.5% last month from a year earlier, beating economists’ expectations of a 2.4% gain, the National Bureau of Statistics data showed Saturday. That is the strongest pace in two years and compares with 2.1% growth in May.

The producer price index, meanwhile, rose 6.1%, above the median forecast of a 6% increase in a Bloomberg survey of economists, though lower than May’s 6.4%. 

While growth in consumer prices is accelerating amid rising costs of pork and energy, inflation is unlikely to become a crisis for China’s central bank similar to that facing its western peers. Consumer demand remains depressed by the nation’s strict Covid control polices and sporadic outbreaks. 

The state economic planner has moved to contain the fast increase in pork prices, a key product in China’s CPI basket, with measures including studying selling pork from state reserves and asking hog farmers not to hoard supplies. 

Advertisement 3

Article content

The consensus now is for CPI to rise 2.2% for the full year, well below the government’s target of keeping it around 3%, although some economists expect it to surge above the threshold at some point in the second half of the year. 

Pork prices fell at a slower pace of 6% in June, following a 21.1% drop in May. On a month-on-month basis, prices of the meat grew 2.9%. 

Core inflation, which removes the more volatile food and energy prices, rose 1%, faster than May’s 0.9% increase.

Improvement

China’s economy showed some early signs of improvement in June, as Covid outbreaks and lockdowns eased. But high-frequency data suggest the economy contracted in the second quarter. Fresh virus flareups in parts of the eastern province of Anhui, and coastal provinces Jiangsu, Fujian and Guangdong, pose a growing threat to the fragile recovery. 

Advertisement 4

Article content

The central bank’s stimulus has been relatively modest this year. The People’s Bank of China is scheduled to review its one-year lending interest rate on Friday, with the median estimate among economists surveyed by Bloomberg being for the rate to remain unchanged this month.

Amid heightened attention on the inflation outlook and under the pressure of capital outflows due to the Federal Reserve’s policy tightening, Governor Yi Gang has signaled that for the rest of the year, monetary stimulus would likely focus on boosting credit rather than lowering interest rates. 

“Chinese inflation dynamics remain very different to those in other major economies,” Craig Botham, chief China economist at Pantheon Macroeconomics, wrote in a note before the data release. “Monetary policy will not need to tighten even after several rising prints, because the long-term outlook remains benign.”

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



Source link

Related posts

Russian missiles hit Ukraine port; Kyiv says it is still preparing grain exports

Indian shares tipped to open higher, with oil prices capping gains

German industrial orders drop in Sept as foreign demand dives