(Yicai Global) May 11 -- China's consumer inflation rose at the fastest pace in five months in April, stoked by the resurgence of Covid-19 in the country and surging fuel prices.

The consumer price index rose 2.1 percent last month from a year earlier, the National Bureau of Statistics said today. That was the most since last November’s 2.3 percent increase. It was also faster than the average 1.85 percent prediction of 19 chief economists surveyed by Yicai Global.

But when food and energy prices are factored out, core CPI growth is slowing, according to the NBS. April’s reading was just 0.9 percent, 0.2 percentage point down on March.

Covid-19 outbreaks in China and the ensuing lockdowns blocked transport routes and led to hoarding. The price of fruits, vegetables and eggs rose sharply amid soaring demand, driving up the CPI, said Li Chao, chief economist at Zheshang Securities.

The cost of fresh vegetables, fruits, eggs and potatoes surged 24 percent, 14.1 percent, 13.3 percent and 11.8 percent, respectively, much faster than in March, said Dong Lijuan, a senior NBS statistician. Gasoline and diesel prices jumped 29 percent and 31.7 percent because of costlier international crude oil.

The cost of pork, though, fell 33.3 percent, a narrowing of 8.1 points from March. But pork prices will start to rise again in the second or third quarter of the year, as the balance between supply and demand becomes tighter, pulling consumer inflation up a little, said Wang Likun, associate researcher at the State Council’s Development Research Center’s Institute of Market Economics.

Factory Gate Prices

The producer price index, a measure of industrial profitability, slowed for the sixth consecutive month to 8 percent last month, mainly due to last year’s high base and weak demand amid the resurgence of Covid-19. The economists polled by Yicai Global forecast a 7.6 percent gain.

Despite surging international commodity prices, departments across the country were able to secure supplies and stabilize prices, slowing the month-on-month and year-on-year PPI growth, the NBS said.

Means of production costs jumped 10.3 percent in April from a year earlier, but the increase narrowed 0.4 percentage point from April 2021, while means of subsistence costs gained 1 percent, up from 0.9 percent a year earlier.

Any increase in May’s factory gate prices is likely to be less than April’s, Zheng Houcheng, director of Yingda Securities Research Institute, told Yicai Global. Non-ferrous metal prices should continue to slide and with the European Union's shelving of plans to ban Russian oil imports and the US’ higher oil output, international prices should halt their sharp rise.

Despite China's imported inflationary pressure, the downward trend of the PPI will not change thanks to a series of supply and price stabilization measures from the government and the high base effect in the second half of last year, said Wu Chaoming, vice president of Caixin Research Institute.

But economic growth led by infrastructure investment will support some product prices, which means that the decline in the PPI is likely to taper off.

Editor: Kim Taylor