Chinese consumer price inflation moderated in December but upstream price pressures surged as a result of higher commodity prices.
According to China’s National Bureau of Statistics (NBS), consumer price inflation (CPI) rose by 0.2% in December, leaving the increase from a year earlier at 2.1%.
It was expected to increase by 2.3%, unchanged from the pace reported in November.
Much of the weakness was driven by a moderation in food price inflation.
It grew by 0.4% during the month, leaving the year-on-year increase at 2.4%. That was well below the 4% rate reported in November, and was the weakest annual increase seen since August.
The deceleration was driven by weaker vegetable prices with those for pork — a staple of the Chinese diet — increasing at an annual pace of 6.2%, up from 5.6% in November.
Despite the moderation in headline CPI, non-food inflation grew by 0.2% over the month, leaving the year-on-year rate at 2.0%.
That was higher than the 1.8% pace reported in November, and was the fastest increase seen since 2011.
On that front, excluding volatile food prices, inflationary pressures within the Chinese economy are building.
Adding to that view, upstream price pressures continued their stratospheric rise, surging on the back of continued strength in commodity prices.
The NBS reported that producer price inflation (PPI) jumped by 5.5% from a year earlier, well above the 3.3% level of November and expectations for an increase of 4.5%.
Producer price inflation is a measure of the cost of inputs for China’s industrial sector.
It was the fastest annual increase seen since September 2011.
Much like then, producers’ prices have been supported recently by higher commodity prices, partially as a result of a rebound in Chinese residential and infrastructure investment.
A spokesperson from the NBS said that weakness in the Chinese yuan — down 6.5% against the US dollar in 2016 — also contributed to the acceleration in producer prices seen during the year.
Raw materials prices, along with mining costs, recorded the steepest annual gains of all categories, rising by 9.8% and 21.1% respectively.