China Aug CPI and PPI Above Expected; Seen Decelerating Ahead

     BEIJING (MNI) - The Chinese consumer and producer price indexes expanded at

a stronger-than-expected pace in August, with both year-on-year and

month-on-month growth rates the highest in a number of months, according to data

released Saturday by the National Bureau of Statistics. 

     Consumer Price Index

     CPI accelerated to 1.8% year-on-year in August from 1.4% in July, and was

higher than the 1.7% median forecast in a MNI survey. The August growth rate is

the highest since the 2.5% rate in January, when China's lunar New Year shopping

usually drives consumer prices higher.

     The month-on-month CPI rate was also the strongest growth since January, up

0.4% m/m in August, expanding 0.3 percentage point from the 0.1% rate in July.

     From January to August, CPI rose 1.5% compared with a year ago.

     Consumer non-food prices accelerated to 2.3% y/y in August, up from 2.0% in

July. Gains were led by a 5.9% y/y jump in healthcare costs and a 2.7% gain in

housing prices, while education and entertainment prices rose 2.5%, the NBS

said. 

     These price gains were partly offset by a 0.2% y/y drop in food prices,

though this decline was much smaller than the 1.1% y/y drop in July.

     But food prices contributed to the expansion of CPI on a month-on-month

basis. Food prices jumped 1.2% in August compared with July, with egg prices

posting a sharp 16.2% rise due to low production, while vegetables price was up

8.5% owing to higher transportation and storage costs on hot weather and rain.

Pork and chicken prices grew 3.0% and 1.3%, respectively. 

     The 0.4% m/m rise in non-food prices was led by diesel and gasoline prices,

which rose 2.9% and 2.7%, respectively, while health care costs (+0.9%) and

housing prices (+0.4%) also rose on the month.

     Produce Price Index

     Producer prices accelerated significantly in August to 6.3% y/y, much

higher than the 5.5% growth in July, and also much higher than the MNI survey

median forecast for a 5.7% gain. The PPI growth rate in August was highest since

April (+6.4%) after a stable rate of 5.5% for the previous three months.

     Compared with July, PPI jumped 0.9%, 0.7 percentage point higher than the

0.2% rise in July and the highest rate since 1.6% in December.

     Year-to-date PPI was up 6.4% y/y.

     Some 81% of the y/y PPI growth rate can be attributed to gains in seven

industries, the NBS said. Prices for coal mining and washing prices surged

32.1%, while ferrous metal smelting and flattening prices rose 29.1%. Oil

processing prices rose 16.8%, non-ferrous metal smelting and flattening was up

16.3%, and oil and natural gas mining prices jumped 15.7%. Prices of non-metal

mineral products, as well as chemical raw materials and product manufacturing,

were up 9.0% and 8.4%, respectively.

     The m/m PPI growth was driven by price hikes in 30 out of the 40 industries

the NBS monitors, 10 more than last month. Ferrous smelting and flattening

(+4.4%) and non-ferrous smelting and flattening (+3.7%) contributed 0.5

percentage point to m/m PPI growth, the NBS said.

     Haitong Securities analysts said the PPI growth was mainly due to cuts in

supplies, but predicted the PPI y/y growth rate would drop in coming months

because demand is dropping and the next few months would see a higher base

effects from last year. The strength of price transmission from PPI to CPI is

still limited, so the CPI inflation rate for the whole year is expected trend

downward, they said.

     They projected the CPI y/y growth in September would dip to 1.6%, while PPI

would rise decelerate to 5.8% y/y.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MAQDS$,M$A$$$,M$Q$$$,MT$$$$]