Chinese CPI weighed down by drop in food prices in August

Inflation in China registered a significant drop as food prices slowed sharply, but economists were confident that the slide would prove short-lived.

The rate of growth in consumer prices in Asia’s largest economy retreated from the 1.8% year-on-year pace observed in July to 1.3% in August.

Economists had penciled in a rise of 1.7%.

A large drop in pork prices which weighed on food inflation was the main culprit.

Thus, food price inflation dropped back from an annual clip of 3.3% to 1.3%, while non-food prices were steady at 1.4%.

Factory gate prices on the other hand continued to recover, with the year-on-year rate of decline easing from -2.8% to -0.8% (consensus: -0.9%), with the recovery in global commodity prices seen as the main factor.

August’s month-on-month rise in China’s producer price index was the fifth over the past six months.

Commenting on the data, Julian Evans-Pritchard at Capital Economics said: “In any case, we think that the PBoC will look through the latest fall in food inflation and see that broader price pressures are generally still on the rise. Indeed, we suspect that CPI’s fall in August will prove short-lived and that inflation will edge back up over the coming months.”