Surging food prices just sent Chinese inflation to the highest level in months

Mark Kolbe/Getty Images
  • Chinese CPI grew at the fastest annual pace since February this year in September, driven by a spike in food prices ahead of a week-long public holiday at the start of October.
  • Non-food inflation moderated over the year, indicating the spike in headline CPI may not be sustained.
  • Producer price inflation also moderated from August, suggesting a decline in upstream price pressures.

Chinese consumer prices inflation (CPI) increased at the fastest annual pace in seven months in September, driven by a sharp lift in food prices ahead of the start of Golden Week holidays in early October.

According to China’s National Bureau of Statistics (NBS), CPI grew by 2.5% in the year to September, accelerating from 2.3% in the 12 months to August.

It was the fastest annual increase since February this year, when another week-long holiday was held.

China’s central bank, the PBoC, has a loose 3% annual target for inflation, although it’s not as important to policy settings compared to central banks located in major developed economies.

Food prices jumped by 2.4% from a month earlier with pork prices — still a staple of the Chinese diet — increasing at an even faster pace of 3.7%.

With 1.4 billion mouths to feed over a holiday week, it’s little surprise food prices jumped.

Over the year, food price inflation rose to 3.6%, a sharp increase from the 1.7% pace of August.

Non-food inflation, in comparison, grew by a slower 2.2% over the year, decelerating from a 2.5% increase a month earlier. From August, non-food items increased by 0.3%.

While consumer prices heated up ahead of Golden Week holidays, producer prices, also known as factory-gate inflation, moderated, growing by 3.6% from a year earlier.

That was down from 4.1% in August and the recent cyclical peak of 4.7% seen in June this year.

Chinese producer price inflation is regarded as a lead indicator for US import prices and CPI pressures in major developed nations. However, given the recent introduction of tariffs on Chinese goods entering the United States, that relationship is likely to weaken as a result.

There has been negligible market reaction to the latest inflation figures. China’s government will release a raft of major economic data on Friday this week, headlined by Q3 GDP.

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