Chinese CPI slows as industrial prices continue to run wild

9 / 08 / 2020 – 10: 00 Updated: 10: 12 – 9 / 08 / 21

The main inflation indicators in China took opposite paths in July, the month in which consumer prices slowed to 1 % year-on-year, while industrials rose again to 9% , reaching highs of more than a decade.

According to official data published today by the National Statistics Office (ONE), the consumer price index (CPI) It was slightly below the 1.1% year-on-year advance of the previous month but also beat analysts’ expectations, who placed their forecasts at to rn to 0.8%.

For its part, the producer price index (PPI), which measures wholesale inflation, was 0.2 points above from the June mark and equaled the May mark, which had been the highest in nearly 13 years .

This continues to reflect the pressure exerted by the rising cost of raw materials on the prices of the industrial sector , a situation in which the Chinese Government has already taken action on the matter, with measures such as public auctions of part of the state reserves of industrial metals.

Industrial prices, on the rise The statistic of the ONE Dong Lijuan points out that “strong increases” in the prices of crude oil and coal and their derivatives were among the factors that caused the PPI to rebound again in July, since in the comparison with the previous month it also registered an advance of the 0.5.

Although Jing Liu, economist for China at HSBC bank, indicates that these data follow the global trend, it also points to another local factor: the heat wave that hit China in July.

The rising line of the cost of raw materials and its impact on the indicator can be summarized in one data: if in the accumulated so far of 2021 have risen by 7.6%, only in the month of July the figure amounted to 12% interannual.

The ONE attributes more than 80% of the PPI increase to eight specific industries , all of them with year-on-year increases in their prices ranging from 20, 9% of the manufacturing of chemical fibers to 54, 6% of the mining and preparation of ferruginous metals . Also on this list are sectors related to oil and gas, coal or non-ferruginous metals.

With regard to metals, state media warned in recent days that restrictions on Transportation in Jiangsu Province (the origin of the latest coronavirus outbreak and China’s main copper producer) could raise prices in August.

The price of pork slows down the CPI In July, the Chinese CPI advanced for the fifth consecutive month after in January and February (months marked by outbreaks of the coronavirus) it contracted by 0.3% and 0.2 %, respectively.

In the comparison between June and July, consumer prices rose by 0.3%, something that Dong attributes in part to the effect of floods and typhoons in some vegetable producing areas of the country, which raised production, storage and transport costs.

Meanwhile, in the year-on-year comparison the opposite effect occurred: it was precisely food prices that fell (-3.7%) while non-food prices became more expensive by 2.% compared to a year ago.

Much of the decline in food prices was due to the main protagonist of the CPI in recent times: pork, which in July was a 43, 5% cheaper than in the same month of 2020 due to recovery of supply following severe outbreaks of swine fever africana, which decimated in a 60% the national herd.

In the non-food products, what became more expensive was transportation fuel (+ 24, 7%), also derived from cited increase in crude oil prices.

Looking ahead, Jing believes that the PPI will stabilize in the coming months while the CPI is ma nwill be “moderate” due to less activity in the labor market and the slow recovery of household consumption.


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