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CPI Momentum Eases A Touch

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--Inflation Eased Also Partly on Waning Effect of Chinese New Year 
--PPI Slowed More Than Expected on Less Economic Momentum
     BEIJING (MNI) - China's growth of consumer and factory-gate prices softened
in March as the government's drive for structural reform slows growth. 
     Consumer price index was 2.1% in March over a year ago, according to data
released by the National Bureau of Statistics on Wednesday. That is sharply
lower than 2.6% projected in an MNI survey, and down from 2.9% in February. On a
monthly basis, CPI also slowed for the first time in nine months, dropping 1.1%
from 1.2% in February.
     The easing of inflation may also be due to the ending of Chinese New Year
celebrations in February, when food prices typically surged and prices for
travel services such as flights and train fares spiked. 
     A sharp 8.4% m/m drop in pork prices, which constitute a significant
portion of China's CPI formula, contributed to the slower CPI. Other food
categories, such as vegetables, dropped 14.8% over the previous month as warmer
weather boosted supply, and prices of eggs, seafood and fruit dropped 7.9%, 3.2%
and 2.4% m/m. 
     The decline in pork price was due to the industry's higher productivity on
improved technique and additional supply.
     Low pork prices may continue for some time, MNI concluded after consulting
industry sources. China's environment protection campaign, however, could weigh
on further growth of pork price as regulators shut down some farms on pollution
concerns. Trade spat with the U.S. may stoke prices after China threatened to
slap 25% tariffs on U.S. soybeans, an essential protein ingredient for animal
     PPI also was below expectation, increased by 3.1% y/y compared with the
3.2% MNI forecast and 3.7% in February. It was the lowest reading since October
2016 when it was 1.2%. 
     M/m PPI growth dropped 0.2%, decelerating from the 0.1% decline in
     Other than the holiday effect, the slowing PPI growth also reflect slower
momentum of China's economic growth as regulators attempted myriad measures to
upgrade its economy: curbing credit growth, controlling financial risks,
tackling a property bubble, cutting excessive capacity, and enhancing
environment protection.
     Finally, the slowing price gains of raw material and commodities
contributed to a softer PPI in March: raw material price growth was 5.1% y/y
from 5.9% in February, when it registered a drop of 0.5%. 
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 10 8532 5998; email:
[TOPICS: MAQDS$,M$A$$$,M$Q$$$]

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