BEIJING: China’s consumer inflation cooled in February because of lower food prices, but factory-gate inflation continued to warm. The Consumer Price Index, a main gauge of inflation, rose 0.8 percent year on year in February, the lowest since January 2015 and down from January’s 2.5 percent, the National Bureau of Statistics said yesterday. It also missed market expectations of 1.7 percent, according to a Reuters poll. The CPI for January and February combined rose 1.7 percent. Meanwhile, the Producer Price Index, which measures costs for goods at the factory gate, surged 7.8 percent, the fastest year-on-year increase in more than eight years.
The gain compared with a 6.9 percent rise in January and market hopes of 7.7 percent. Sheng Guoqing, a bureau analyst, attributed the slower CPI to a high base last year and lower prices of food. Prices of fresh vegetables tumbled 26 percent year on year and pork prices fell 0.9 percent, Sheng said. Fewer travelers after the Chinese New Year also resulted in a 12.2 percent drop in air ticket prices month on month, a 7.7 percent decline in travel agency prices and a 3.6 percent fall in hotel rates. Sheng attributed the fast growth in the PPI to a low base last year and price rise in oil and gas, which surged 85.3 percent year on year. Of the 40 industries covered by the bureau, prices rose in 33 industries, flat from January. Analysts said the divergence between CPI and PPI indicated very little inflation was transferred from factory gate to consumers.
“The high base effects of food prices last year could continue to weigh on the overall CPI in the coming months, and we forecast the PPI to soften later this year, based on our assumption of relatively stable commodity prices through 2017,” Australia and New Zealand Banking Group said in a note yesterday. “But the data back our opinion that the transfer effect should be rather weak.” ANZ said the lower-than-expected CPI should alleviate the upward pressure on benchmark deposit or lending rates amid the central bank’s efforts in preventing financial risks. The government kept this year’s CPI target at 3 percent and economic growth target around 6.5 percent, compared with last year’s 6.5-7 percent.
