China: Inflation Eased To 6.2% In August9 September, 2011, 11:50. Posted by Zarathustra
Tags: Economy, Inflation
Inflation in China finally shows a little sign of easing, although hardly under control as defined as at or below 4%. The National Bureau of Statistics latest data set shows headline consumer price index (CPI) inflation eased from 6.5% yoy in July to 6.2% yoy in August, in-line with market expectation. On a month-on-month basis, the headline number rose 0.3% compared to the previous month, vs. 0.5% gain in July, a good sign here.
Looking at different categories, although food inflation has come down, it is still leading the overall price gain as prices in this category rose 13.4% yoy, vs. 14.8% yoy in July, while non-food prices increased by 3.0% yoy, rising from 2.9% yoy gain in July. Within food category, meat prices led the gain as they rose by 29.3% yoy in August, eased from 33.6% yoy gain in July. On a month-on-month basis, food prices rose by 0.6% in August vs. 1.2% gain in July, quite a sizeable improvement, although the annualised rate would still be very high, while non-food prices gain by 0.2% in August, vs. 0.1% increase in July, a slight acceleration here.
On another note, the headline producer price index (PPI) rose 7.3% yoy, easing from 7.5% in July, but above market expectation of 7.2%.
Source: National Bureau of Statistics
The headline figure has shown some improvement, particularly in the food category which has shown some improvement in the inflation picture. Inflation in non-food components seem to have accelerated slightly, although not at a rate that should alarm everyone. On the whole, it looks like a piece of good news, at least on the surface. Do note, however, that this is still hardly the rate the Chinese government was looking for, and there seems to be little doubt that the Chinese government will fail to deliver their target of 4% inflation for the entire year. Thus this is not soft landing at all.
Thus I can repeat myself again, that there is no good reason for policy makers to start easing today if price stability is still the priority, although growth concern within China as well as the growing uncertainties in Europe will make policy makers hesitate, or even to ease policy, which is wrong in my view.