Chinese consumer price inflation (CPI) decelerated sharply last month, although there was better news when it came to upstream price pressures.
According to China’s National Bureau of Statistics, CPI grew by just 1.3% in the year to August, a figure that was well below the 1.8% pace seen in July and expectations for a decrease to 1.7%.
It marked the slowest annual growth in CPI since May last year, and is now running well below the 2.3% pace seen just four months earlier.
Over the month CPI rose by 0.1%, down from 0.2% in July and forecasts for increase of 0.3%.
A sharp drop in food inflation, particularly for pork, explained the steep decline in the annual CPI rate. Food prices grew by just 1.3% from a year earlier, down on the 3.3% pace reported previously. Pork prices slowed sharply, growing at an annual pace of 6.4% from 16.1% in July.
Non-food inflation rose by 1.4% from a year earlier, unchanged from July.
Although CPI was weak, suggesting that price pressures may start to build, producer price deflation eased significantly over the same period, declining by just 0.8%.
The reading was an improvement on the 1.7% decline seen in the year to July and forecasts for a contraction of 0.9%.
Though producer prices have now fallen in annual terms for 54 consecutive months, the pace of deflation was the weakest seen since April 2012.
Still bad, but the trend is clearly improving.
Perhaps reflective of the mixed data set, markets have barely budged following the release of the reports.
Some will see the slide in CPI as a sign of economic weakness, while other will view it as increasing the odds of further monetary policy stimulus being implemented by the People’s Bank of China.
In August most Chinese economic data has beaten expectations. Manufacturing activity expanded at the fastest pace seen in nearly two years while import demand grew for the first time in 2 months in annualised terms.
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