Chinese inflation data for August has come in mixed, with consumer price inflation jumping to a one-year high despite producer price inflation falling to a fresh six-year low.
From a year earlier consumer prices increased by 2.0%, well above the 1.6% pace of July and expectations for an acceleration to 1.8%. It was the fastest pace recorded since August 2014.
Breaking down the report, much of the increase came from food prices, which jumped 3.7% thanks to a 19.6% surge in pork prices. Excluding food, prices rose by a more modest 1.1%, unchanged from July.
They don’t dub the CPI release the “China pork index” for nothing.
While CPI accelerated, the PPI fell to a fresh multi-year low, sliding 5.9% from a year earlier, significantly below the 5.5% drop expected. Not only was it an acceleration on July’s 5.4% decline, it marked the fastest pace of deflation since September 2009.
Despite the CPI jump, much of the report’s focus will be on the PPI reading given the former was largely impacted by a sudden jump in pork prices. The continued deceleration in raw material prices will do little to quell concern about sagging domestic demand, nor broader concerns about a slowdown across the Chinese economy.
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