China CPI gains in May but underlying pressures limited
- Author: Zachary Reyes Jun 10, 2017,
Jun 10, 2017, 3:40
Food prices fell by 1.6% over the same period, courtesy of a 12.8% plunge in pork prices, a staple of the Chinese diet.
It was the fastest year-on-year expansion since January this year, but still well below the 3% level targeted by the People's Bank of China.
Excluding volatile food and energy prices, the core CPI increased 2.1 percent year on year in May, which was the same as the previous month. The CPI rose 1.5 percent y/y in May compared with 1.2 percent in April, as the decline in food prices eased. Prices were expected to gain 5.6 percent in May. Purchasing prices climbed 8 per cent compared with 9 per cent the prior month.
NBS attributed the pick-up in CPI to higher non-food prices, which grew 2.3 percent year on year in May.
Analysts polled by Reuters had predicted May producer price inflation would be at 5.7 percent on an annual basis.
"We think consumer price inflation will remain fairly stable over the coming quarters thanks to a further recovery in food price inflation".
Another report from NBS showed that producer price inflation slowed notably to 5.5 percent in May from 6.4 percent in April.
But while consumer prices edged higher, upstream price pressures continued to weaken - an outcome that may have implications for inflationary pressures worldwide in the months ahead. This was the second consecutive drop in prices.
China's economy, a vital engine of global growth, expanded 6.7% for all of past year, the slowest rate in a quarter of a century. The benchmark Shanghai Composite Index rose 0.26 percent to close at 3,158.40 points.
Deng Haiqing, chief economist with JZ Securities, said mild CPI growth would give policy makers more scope to contain debt and financial risk.
China has shifted away from a relatively loose monetary policy that helped growth over the past years, gradually guided interbank lending rates higher and tightened supervision on non-performing assets, shadow banking and local government financing.