BEIJING – China’s consumer prices have risen to their highest level in six months, while inflation at the factory gates has also accelerated, reinforcing the view that economic growth is solid and central bank policy is the focus.
According to the NBS, the main indicator of China’s inflation in April, increased by 2.5% year-on-year due to the tight supply of vegetables and pork.
Data consistent with market expectations showed a 2.3% increase in March and a 1.5% increase in February. On a monthly basis, consumer prices rose slightly by 0.1%, compared with a drop of 0.4% a month ago.
Food prices accounted for nearly one-third of China’s CPI weight, up 6.1% year-on-year.
Vegetable and fruit prices rose by 17.4% and 11.9% respectively over the same period last year.
Affected by African swine fever, the number of Chinese pigs and breeding sows has fallen sharply, putting upward pressure on pork prices. In April, pork prices rose by 14.4% year-on-year, driving CPI growth by 0.31 percentage points.
Wang Junxun, an official with the Ministry of Agriculture and Rural Affairs, said earlier that pork prices will continue to rise and that hog prices may hit record highs in the fourth quarter of 2016.
According to experts’ estimates, pork prices are expected to increase by 70% in the second half of the year.
In a research report on data, Asian financial services group Nomura Securities said that the rapid spread of African swine fever is expected to increase pork prices by 40% in the next six months.
It expects the overall growth of CPI to exceed 3% in the past few months, but said that the inflationary pressure exerts little pressure on the central bank’s monetary policy, because annual inflation may still be around 2.5%, far below the government’s target of 3 percentage points.
The producer price index, which measures factory inflation, has also improved. After nine months of initial acceleration last month, market demand improved, rising 0.9% year-on-year.
These data provide new evidence that the Chinese economy is stabilizing a series of government support policies.
On the currency side, the central bank continues to use structural tools rather than stimulating the economy to boost the economy. It announced on Monday that it would use relatively low deposit reserve ratios for some small and medium-sized banks to help small businesses with tight cash.
Looking ahead, Nomura expects the government to further relax its policies to increase confidence and stabilize growth.
