China's Inflation Cools To 3.4%, Food Inflation Up 7.0%

China’s consumer price inflation continued with the downward trend in April.

Consumer price inflation increased by 3.4% on an year-on-year basis, falling from 3.6% yoy of the previous month, in-line with market estimates.  On a month-on-month basis, consumer price fall by 0.1% in April.

Food remains to be the category with high rate of inflation on an year-on-year basis.  Food prices increased by 7.0% yoy only, while non-food prices increased by 1.7% yoy only.  On a month-on-month basis, food prices were down by 0.9%, contributed by negative prints from meat and vegetables, while non-food prices increased by 0.3%.

On another note, producer price index is down 0.7% yoy, below market estimates of –0.5%.


Photo: Also Sprach Analyst



Photo: Also Sprach Analyst

Source: National Bureau of Statistics

The on-going trend confirms the core view here that there will be no inflation whatsoever in the future because of over-investment in the past.  Indeed, the month-on-month changes of CPI has been close to zero for the recent months, except for the spike in the Chinese New Year.  The future could be deflationary, in my view, because of massive over-investment in the past would mean over-capacity across sectors.  In particular, the on-going burst of the real estate bubble will, in my view, lead to a debt deflation scenario due to a massive overhang of debt in the economy.

This article originally appeared here: China inflation slowed to 3.4% in April 2012
Also sprach Analyst – World & China Economy, Global Finance, Real Estate

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