Economic Watch: China's consumer inflation hits 15-month high, factory prices soften

Source: Xinhua| 2019-06-12 20:51:24|Editor: Yamei
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A customer selects vegetables at a supermarket in Wuxi City, east China's Jiangsu Province, June 12, 2019. China's consumer price index (CPI), a main gauge of inflation, rose 2.7 percent year on year in May, quickening from the 2.5-percent growth for April, the National Bureau of Statistics (NBS) said Wednesday. (Xinhua/Huan Yueliang)

BEIJING, June 12 (Xinhua) -- China's consumer prices rose to the highest level in 15 months while inflation at the factory gate softened. Analysts believe inflation will remain in a benign range.

The consumer price index (CPI), a main gauge of inflation, accelerated to 2.7 percent year on year in May, exceeding 2 percent for three consecutive months, data from the National Bureau of Statistics (NBS) showed Wednesday.

The reading, in line with market expectations, moved up from the 2.5-percent expansion in April. On a monthly basis, consumer prices remained flat last month, compared with the 0.1-percent increase in April.

Food prices climbed 7.7 percent year on year last month, up from 6.1 percent in April, with prices of fruits, eggs and pork surging.

"The reduced yields of apples and pears last year, understocks of fruits and rainy weather in southern China this year caused the price hike of fruits," said NBS official Dong Yaxiu.

Fruit prices went up 26.7 percent year on year in May, while on a monthly basis, the prices increased 10.1 percent, contributing to 0.2 percentage points to the monthly CPI growth.

The pork price went down 0.3 percent month on month with lower consumption demands as the weather became hotter. However, compared with a year ago, the pork price was up 18.2 percent, 3.8 percentage points higher than that in April.

"We believe the surge in fruit and egg prices will be short-lived and could subside in summer when supply increases," said a research note from Nomura.

Nomura predicts that pork prices could rise further due to a sharp decline in hog stock as a result of the spread of African swine fever, but the falling weight of pork in the CPI basket could help contain the rise of headline CPI inflation.

A research team from Huatai Securities also believes that the rising price of fruits will not consistently push up the CPI as fruits suppliers could quickly adjust their planting and production.

Wednesday's data also showed that China's producer price index, which measures costs for goods at the factory gate, softened to 0.6 percent year on year last month, lower than the 0.9-percent growth in April.

On a monthly basis, producer prices went up 0.2 percent in May, narrowing from the 0.3-percent increase in April, reflecting weaker domestic demand.

"Looking forward, upside risk of CPI may lessen as the low base passes, and CPI may not be a constraint on monetary policy; meanwhile, PPI may soften further as external uncertainties persist and industrial profits remain under pressure," said a report from China International Capital Corporation Limited.

China will undertake further stimulus measures to bolster confidence and stabilize growth in the future, according to Nomura.

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