Consumer inflation cools as food costs fall
CHINA’S consumer inflation cooled last year while factory-gate prices rose for the first time in six years amid stable economic growth, National Bureau of Statistics data showed yesterday.
The Consumer Price Index, a main gauge of inflation, rose 1.6 percent year on year in 2017, lower than 2016’s 2 percent. The 2017 increase was in line with market expectations.
The Producer Price Index, which measures changes of prices at the factory gate, rose 6.3 percent last year, ending a falling streak over the past five years.
Last month, consumer inflation was 1.8 percent, up from November’s 1.7 percent. PPI in December rose 4.9 percent year on year, down from November’s 5.8 percent and the slowest pace since November 2016.
Sheng Guoqing, a senior statistician of the bureau, said food prices fell in 2017 for the first time since 2003 led by pork and fresh vegetables, contributing to the milder consumer inflation data. Non-food prices rose 2.3 percent year on year, 0.9 percentage points faster than 2016, as service prices rose 3 percent.
The rising factory-gate prices were led by oil and gas, coal, and metal sectors, said Sheng, though the pace has been slower in the second half.
Lian Ping, chief economist of the Bank of Communications, said the core CPI, which doesn’t include food and fuel prices, rose 2.2 percent last year, indicating stable domestic demand and economic growth.
A recovery of food prices this year may see CPI reach 2 percent, he added, while weakening momentum of commodity prices will slow down the PPI increase this year to 3.5 percent.
“Prices conditions this year will support stable economic growth and will not press adjustment in monetary policies,” Lian said.
Australia and New Zealand Banking Group economists said in a note that China’s capacity-reduction program for steel and coal will likely be completed this year and extended to other sectors, sustaining growth in factory-gate prices.
The ANZ economists expected China’s central bank to steer money market interest rates up by 35 basis points in an effort to support its deleveraging campaign.
GDP grew 6.9 percent year on year in the first three quarters of 2017, above the government’s annual target of around 6.5 percent.
The statistics bureau is due to release 2017 GDP growth next Thursday.
Wang Tao, UBS chief China economist, said on Tuesday she expected China’s economy to grow 6.8 percent last year and 6.4 percent this year.
She said a weaker home market and infrastructure investment will overshadow growth in industrial profits and consumption.