Chinese inflation in the year to March rose a less than expected 2.3%, China’s National Bureau of Statistics reported this morning.
While the monthly print of 0.4% was slightly above consensus of 0.3%, it is the year on year data the market pays more attention to. That print, of 2.3%, was slightly below the market forecast of 2.4% but in line with the level of consumer price rises in February after inflation leapt to 2.3% from January’s print for the previous 12 months of just 1.8%.
Authorities in Beijing will be concerned that it is food that is still driving consumer prices. In the year to March 2016, pork prices are up 28.4% while fresh vegetables soared 35.8% in the same 12 months. Taken together, these two items make up around 1.5% of the 2.3% print for the year.
That highlights the difficulty facing Chinese authorities with the economy apparently still mired in deflationary pressures at a wholesale level (producer prices fell 4.3% in the year to March) while ordinary Chinese are being assailed by raging increases in the cost of the essentials of life.
While the continued improvement in the rate of producer price declines from near 6% earlier this year to March’s 4.3% print is encouraging, the dichotomy between food prices and the rest of the economy’s price rises speaks volumes to the potential economic and social upheaval as China transitions away from its manufacturing base.
The data also neatly highlights why a member of China’s national planning committee says China needs to devalue its currency by 15%.