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China July inflation picks up but may ease in coming months

2020/8/11 9:11:50   source:CGTN

A double whammy of pandemic and flooding has made ordinary Beijing consumers feel the pinch from rising food prices. Some are complaining prices are generally higher, especially for pork, others say eggs cost more than before.

Tan Hongyu, an employee at Hema Supermarket in Beijing, said: "Pork prices have been rising for four weeks in a row. It's almost doubling from last year. For example, this pork cost 84 yuan per half (a) kilo."

China's consumer price index rose 2.7 percent in July from a year earlier. That was a slight uptick from a 2.5 percent gain in June. But the rise in food prices was more acute. Pork prices soared 85.7 percent year on year, while vegetables gained 7.9 percent. In contrast, core inflation, which excludes food and energy prices, was at a 10 year low of 0.5 percent.

However, analysts say the effects may not last long, as temporary factors subside.

"After August, the heavy rainfall's impact on food prices will gradually subside," said Liu Xinwei, Senior Researcher of Sublime China Info.

This is echoed by Xia Chenfeng, an analyst from Nxin, "Judging from the current pork production cycle, the pork prices will remain high in the 3rd quarter, but the gains will be capped. In the fourth quarter, prices will be falling."

Meanwhile, China's PPI declined 2.4 percent on year in July, narrowing from a 3 percent drop in June. Analysts say the slowdown in factory deflation was mainly due to higher commodity and industrial product prices.

According to Liu Xinwei, Senior Researcher of Sublime China Info, the recovery in demand is the main driver of higher industrial product prices as China's industrial production has recovered fast.

However, analysts also say China's inflationary pressure will soften toward the year's end, as still, sluggish household demand will pressure CPI, while PPI is likely to remain in negative territory due to uncertainties over COVID-19 and China-U.S. tensions. 

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