THE country’s factory inflation slowed in May as faltering manufacturing hit demand, reinforcing worries about cooling growth in the world’s second-largest economy, while a surge in food prices could add to consumer grievances about living costs. China’s producer price index (PPI) in May rose 0.6 percent year on year, the National Bureau of Statistics (NBS) said in a statement yesterday, in line with analyst expectations and lower than a 0.9 percent uptick in April. In contrast to the softer upstream prices, consumer inflation accelerated, driven by soaring food prices, which rose at their fastest pace in seven years, as bad weather hit fruit production and African swine fever reduced pork supply. However, while analysts expect some upside risks to the headline consumer price index in coming months, most do not expect retail inflation to constrain the central bank’s hand in easing monetary policy to prop up slowing growth. “With economic growth unlikely to stage a strong recovery and industrial commodity prices likely to remain subdued, we don’t see much upside to PPI and non-food CPI,” said Capital Economics in a note yesterday. Producer inflation gauges in China, closely tracked by analysts and investors, are seen as bellwethers of industrial demand in the economy. The consumer price index (CPI) in May rose 2.7 percent from a year earlier, NBS data showed yesterday, in line with expectations and the fastest rise since February 2018. The headline jump was driven by a 7.7 percent year-on-year increase in the food price index, the fastest pace since January 2010 and higher than April’s reading of 6.1 percent. Fresh fruit prices soared 26.7 percent in May from a year earlier and hovered around historical highs, according to the NBS However, Chen Changsheng, a researcher with the State Council, said the government should look past these short-term disturbances in their deliberations over macroeconomic policy. “Even though the headline CPI figure will face some upward risks ... but from the macro perspective, we advise looking at the core CPI,” Chen said at a forum in Beijing at the end of last month. The core inflation that strips out volatile food and energy prices eased to 1.6 percent in May from a year earlier, from 1.7 percent a month earlier. On a month-on-month basis, the CPI remain unchanged, compared with a 0.1 percent gain in April.(SD-Agencies) |