What inflation hides in China
China's consumer price index rose 1.5% in October, while the producer price index is at its highest since 1995. Data, comments and analysis
China's consumer price index rose 1.5 percent in October compared to a year ago, compared with a 0.7 percent increase in September. As the South China Morning Post explains, public fears about food shortages are involved. Meanwhile, factory-gate inflation, the one concerning the prices of goods as soon as they leave the production plants, is at its highest in twenty-six years.
The data on the increase in the consumer price index – official: it comes from the National Institute of Statistics – is higher than analysts' expectations: a Bloomberg survey had estimated its growth at 1.4 percent. The Chinese authorities' goal is to achieve growth of around 3 percent in 2021, lower than the value recorded in 2020 (+3.5 percent).
THE OFFICIAL STATEMENTS
The National Statistics Institute explained that in October the consumer price index rose due to the "combined influence of inclement weather, contradiction between supply and demand for some raw materials, and rising costs".
Last week, the Chinese Ministry of Commerce asked local authorities to stabilize both food supplies (meat, vegetables, cooking oil) and prices, in view of the cold season. However, the announcement caused panic-buying among citizens; the authorities had to reassure the population that there is no risk of food shortages.
CONSUMER INFLATION
Putting energy and food price volatility aside, China's consumer inflation rate rose 1.3 percent in October compared to the previous year. In September, the increase was 1.2 percent.
THE PRICES OF FOOD
Food prices fell 2.4 percent in October; in September the fall had been stronger, by 5.2 per cent. The increase was driven by nearly 16 percent growth in the price of vegetables over last year. On the other hand, the price of pork – widely consumed in the country – dropped by 44 percent.
THE PRODUCTION PRICE INDEX
The producer price index – refers to the prices imposed by factories on distributors of their products – instead increased by 13.5 percent in October compared to 2020: this is the highest value since July 1995. Analysts heard from Bloomberg had predicted a more modest increase of 12.3 percent.
The increase in producer prices is mainly due to the very significant increase in the cost of coal (+103.7 per cent in October on an annual basis) necessary for industrial plants and for the generation of electricity.
WHAT THE GOVERNMENT WILL DO
Chinese Prime Minister Li Keqiang announced last week that the authorities would lower taxes for companies, especially small and medium-sized ones, to give the economy some respite. Small and medium-sized enterprises are worth 80 per cent of employment in urban areas, but are in trouble due to the high prices of raw materials and transport.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/cina-indice-prezzi-consumo-produzione-ottobre-2021/ on Wed, 10 Nov 2021 08:38:31 +0000.