Chinese inflationary pressures remain weak

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Chinese consumer price inflation remains weak, and it looks like the rebound in factory-gate prices is now also past its peak.

According to figures released by China’s National Bureau of Statistics (NBS) on Wednesday, consumer price inflation (CPI) increased by just 0.9% from a year earlier.

While above the 0.8% increase reported in February, the figure came in fractionally below the 1% gain that had been expected. Over the month, CPI fell by 0.3%, a result that was in line with expectations.

Explaining the headline weakness, the NBS said that food prices fell by 4.4% from a year earlier, largely offsetting an increase in non-food inflation of 2.3% over the same period.

Pork prices, a staple of the Chinese diet, declined by 3.2%, down from the 0.9% drop reported in February.

Although below the 2.5% increase reported in the 12 months to January, non-food prices have been trending higher recently, sitting well above the 1.1% pace reported in the year to April 2016.

That suggests that underlying inflationary pressures are continuing to build, masked by a drop in food prices over the past year.

Adding to signs that inflationary pressures are moderating, growth in factory-gate prices also slowed with producer price inflation (PPI) rising 7.6% from a year earlier, down from 7.8% in February.

Though still quick, it suggests that reflationary spurt caused by higher commodity prices since the beginning of last year has now past its cyclical peak.

The NBS said that mining inflation cooled to a still-brisk 33.7% over the year, down from 36.1% in February, while raw materials prices grew by 14.9%, below the 15.5% level reported previously.

There has been no reaction to the data with markets more likely to react to the release of updated monetary growth figures from the People’s Bank of China (PBoC) later this week.

While there is no set time or date for the release, it will be influential on financial markets given an acceleration in credit growth has helped to boost activity after a sharp slowdown in the Chinese economy occurred at the start of 2016.

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