Explainer | Will weak demand continue in China?: 4 takeaways from August’s inflation data
China’s consumer price index (CPI) grew only 0.6 per cent in August, while the producer price index (PPI) also fell short of expectations
1. Food reflation lifts CPI
The overall CPI reading fell short of the expected 0.71 per cent growth projected by economists polled by Chinese financial data provider Wind.
Vegetable prices rose by over 20 per cent year on year due to extreme weather, which pushed food inflation up from zero per cent year on year to 2.8 per cent, according to Gabriel Ng, assistant economist at Capital Economics.
“Despite a weather-related surge in vegetable prices, a fall in energy prices and core inflation meant CPI only rose a touch,” Ng said.
On a month-on-month basis, China’s inflation in August remained positive after increasing by 0.4 per cent following a 0.5 per cent increase in July, according to the National Bureau of Statistics.
“Deflation remains a major risk for China’s economy. CPI inflation in August edged higher, mostly driven by food prices due to temporary factors such as heavy rainfalls. Excluding food, CPI inflation dropped by 0.3 per cent month-on-month in August,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
