(Yicai Global) March 10 -- China is facing pressure from imported inflation amid rising global commodity prices, but the overall effect is likely to be mild as domestic consumption gradually recovers, according to economists.

The Consumer Price Index sank for a second straight month in February, dropping 0.2 percent from a year earlier, as the cost of pork fell as supplies of the meat rose, according to data the National Bureau of Statistics released today. Meanwhile, factory gate prices, a measured by the Producer Price Index, added 1.7 percent.

Commodity prices, including those of crude oil and non-ferrous metals, have rallied as the US and European economies pick up and as overseas liquidity expands, Wu Chaoming, chief economist at Chasing Securities, told Yicai Global. 

Wu noted that China faces pressure from imported inflation, as higher commodity prices are set to show up in the cost of manufactures and will then filter through to consumers. 

Still, the effect on inflation “will not be very large, and the transmission of inflation from the PPI to the CPI will not be significant,” Wu said, adding that demand still lags supply, so demand will not support high inflation.

Wang Jun, a member of the academic committee at the China Center for International Economic Exchanges, expressed a similar opinion, saying that some commodities in China depend greatly on external factors. China’s PPI will rise in the first half due to these influences, but the effect on the CPI will be delayed, Wang said, as consumption is only gradually reviving. 

Chinese incomes are slowly rising and resumed consumption will need more time, Wang Jinbin, deputy head of the School of Economics at Renmin University of China, told Yicai Global. Consumer caution may result in a fall in the CPI.

Meanwhile, the gains in the PPI appear to be based on pricier raw materials, which is unlikely to continue as global supplies of commodities improve. 

Upstream oil and natural gas industry prices jumped 7.5 percent last month from January, while prices in the downstream oil, coal and other fuel-processing sectors rose 4.9 percent, with corresponding upticks in costs for makers of chemicals, chemical fibers and related raw materials. 

Editors: Liao Shumin, Tom Litting