(Yicai Global) Sept. 9 -- China’s consumer price index, a gauge of consumer inflation, increased at a slower-than-expected rate in August as global oil prices tumble and domestic demand stays weak.

In August, the CPI climbed 2.5 percent from a year earlier, according to data released by the National Bureau of Statistics today. This is less than July’s 2.7 percent gain and below the 2.79 percent clip forecast by an Yicai Global poll of chief economists.

The CPI growth was less than expected, Zheng Houcheng, director of Yingda Securities Research Institute, told Yicai Global. In the context of sluggish global demand, international oil prices dropped sharply last month and China cut the price of refined products several times.

Domestic demand stayed low as flare-ups of Covid-19 continued to suppress spending. Core CPI, which excludes food and energy prices, advanced 0.8 percent in August year on year, the same as in July. The carryover effect of last year’s price changes was about 0.8 percentage point, and the impact of new price markups was around 1.7 percentage point, the NBS said.

Pork prices, though, surged 22.4 percent in August from a year earlier, 2.2 percentage points more than in July, mainly due to the low base in the same period last year.

The National Development and Reform Commission has started to release frozen pork reserves in order to guarantee pork supply and keep prices stable during the upcoming Mid-Autumn Festival and National Day holidays. It released this year’s first batch of reserves yesterday and is coordinating with local governments to free up more in different regions.

The target to keep inflation within 3 percent this year is achievable, Yang Yinkai, deputy secretary general of the NDRC, said recently. Prices could still rise this year and early next year, and this will hurt those in difficulties. China will introduce more price subsidies for people in need to ensure their livelihoods.

Factory Prices

The growth of the producer price index, which is a measure of industrial profitability, also slowed by more than expected in August. It climbed 2.3 percent year on year, much lower than the 3.19 percent predicted by the Yicai Global survey.

The slowdown in PPI growth can be put down to three factors, besides last year’s high baseline, said Dong Lijuan, a senior statistician at the NBS’ city department. First, international crude oil and non-ferrous metal prices fell. Second, the hike in coal production is taking effect. Third, the demand in steel and other industries was weak.

September’s PPI could fall even further in view of last year’s high baseline, the carryover effect and as commodity prices come under pressure, Zheng said.

Although the gradual recovery of demand will lead to higher prices of goods and services, China’s inflationary pressure is not expected to put too much pressure on macroeconomic policies, as a moderate rise in the CPI can offset the continuous decline in PPI, Pang Ming, chief economist and head of research at Jones Lang LaSalle Greater China, told Yicai Global.

Editor: Kim Taylor