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--Pork Prices To Keep Pushing Up CPI
--Producer Prices Rise On Base Effects, But PPI Deflation Possible
BEIJING (MNI) - China's consumer price index rose to a six-month high in
April and the producer price index built on March's first gain in nine months,
data released by the National Bureau of Statistics on Thursday showed.
It isn't a general rise in prices, that has most economists eyeing the
data, but the increasing cost of pork and oil.
Inflation rose 2.5% y/y in April, up from 2.3% in March, missing the 2.6%
projected by economists polled by MNI. While PPI also rose to 0.9% y/y from
March's 0.4%, beating the 0.6% forecast in an MNI survey.
--PORK PRICES SPIKED
April food price rose 6.1% y/y, compared with 4.1% in March, dragging CPI
higher by 1.19 percentage points, the NBS said. The price of pork continued to
rise, up by 14.4% y/y after for the first time in 25 months in March, gaining
5.1%, pressured by supply disruptions caused by an outbreak of African swine
Pork prices are in an upward cycle and will keep pushing CPI higher, Li
Chao, an analyst at Huatai Securities wrote in a report, noting that the peak
would likely be seen in the middle of this year, although it would be below the
government's 2019 3% ceiling.
Climbing pork and oil prices could be the greatest upside risk, as
geopolitical conflicts in the Middle East may lead to a short-term rapid rise in
oil prices, Li added.
Core CPI, excluding food and energy prices, was stable at 1.7%, edging
lower from March's 1.8%, CICC noted in a report.
--BASE EFFECTS HELPED
PPI rose 0.9% y/y, up from March's 0.4%, outpacing the 0.6% forecast in an
MNI survey and hitting a four-month high. This is partly due to higher
production material prices, which rose 0.9% y/y from March's 0.3%, dragging PPI
up 0.66 percentage points, the NBS said.
The pickup was helped by a rise in ferrous metal prices as well as oil
processing, said Deng Haiqing, chief economist at Wallstreet CN in a report.
Base effects from last year were a main driver for the rise of both PPI and
CPI, according to the NBS. Carry-over effects from last year contributed 1.3
percentage points to the CPI gains in April, and as for PPI, the base factor
made up for 1.1 percentage points, the NBS said.
Going forward, CPI could soar further and break 3%, though it is unlikely
to stay above 3% for long, unless the credit cycle accelerates to expand. While
May PPI growth could be suppressed by the high base same period last year.
Meanwhile, the value-added tax rate cuts may dampen the PPI gains in the short
term, according to the CICC report.
April could be the peak of PPI this year, and ex-factory gate deflation is
still high possible, Deng warned.
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