TRADE WARS
China consumer and producer inflation rise
by Staff Writers
Beijing (AFP) May 9, 2019

Factory and consumer inflation in China picked up in April, a positive sign for the world's number two economy, though analysts warned real demand remained subdued.

Beijing has struggled to get prices to rise in recent months, with both measures staying stubbornly low as global growth cools leading to weak demand and a trade war with the US festers.

Data released Thursday showed the consumer price index (CPI) -- a key measure of retail inflation -- rose 2.5 percent on-year last month, up from 2.3 percent in March.

The gain came on the back of soaring pork prices -- rising 14.4 percent on-year -- owing to an outbreak of African swine flu in China that has led to the culling of a million pigs.

Prices of other fresh meats, fruit and vegetables also increased.

"We believe the rapid spread of African Swine Fever since August 2018 could help push up pork prices by another 40 percent over the next six months," said Lu Ting of Nomura bank.

"The rise of CPI inflation is being driven by a surge in pork prices as a result of a supply shock," he said in a research note.

The producer price index (PPI) -- an important barometer of domestic demand -- climbed 0.9 percent, from 0.4 percent in March.

The CPI reading was in line with forecasts in a Bloomberg survey while the PPI reading came in above the forecast 0.6 percent.

Still economists remain sceptical about China's outlook.

"Both official measures of inflation picked up last month but this shouldn't be interpreted as evidence of stronger domestic demand," said Julian Evans-Pritchard of Capital Economics, noting key drivers of the upswing included higher pork, iron and oil prices.

"But with core CPI moving in the opposite direction, there are still few signs of a demand-driven pick-up in inflationary pressures," said Evans-Pritchard.

Growth in the first quarter stabilised at 6.4 percent in China after falling to 6.6 percent last year, its lowest annual rate in almost three decades.

"We believe a double dip of growth is a real risk, and Beijing can't afford to stop easing yet," said Lu of Nomura.


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