China’s consumer prices grew faster than expected in June, driven in part by a rebound in pork prices, although the government’s “zero COVID” strategy continued to cut demand. Inflation in industrial producer prices slowed down due to the easing of commodity prices.
Data from the National Bureau of Statistics showed on Saturday that consumer prices grew 2.5% last month on an annual basis, topping economists’ expectations for a 2.4% increase. To be the strongest pace in two years, up from May’s rate of 2.1%.
Meanwhile, the Producer Price Index rose 6.1%, above the median forecast for a 6% increase in a Bloomberg survey of economists, albeit less than 6.4% in May.
Eric Chu of Bloomberg Economics wrote on Saturday that “China’s inflation data for June indicates stagnation of demand“Basic prices away from food and energy are barely budging – a sign that zero-Covid restrictions continue to stifle spending on services,” he added.
While growth in consumer prices is accelerating amid rising pork and energy costs, inflation is unlikely to become a crisis for China’s central bank similar to the one facing its Western counterparts. Consumer demand remains low due to the strict control policies of the Covid virus and the intermittent outbreak of the epidemic in the country.
The government is moving to contain the rapid increase in the price of pork, a key product in China’s CPI basket, with measures including a study of selling pork from state reserves and requiring pig farmers not to hoard supplies.
The consensus now is that CPI will rise by 2.2% for the full year, well below the government’s target of keeping it around 3%, although some economists expect it to rise above that ceiling sometime in the second half of the year.
Pork prices fell at a slower pace of 6% in June, following a decline of 21.1% in May. On a monthly basis, meat prices in general in June increased by 2.9% on a monthly basis.
Core inflation rose, which excludes Food and energy prices The most volatile, at 1%, which is faster than the 0.9% increase in May.