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REPEAT: China PPI Hits 6-Month High; CPI Lower But Solid

Repeats Story Initially Transmitted at 04:11 GMT Oct 16/00:11 EST Oct 16
     BEIJING (MNI) - China's producer price index saw better-than-expected
growth in September while the consumer price index grew at a slightly slower
pace than in August, according to data released by the National Bureau of
Statistics on Monday.
     Consumer Price Index
     The CPI rose 1.6% in September on a year-on-year basis, down from the 1.8%
increase in August and in line with the 1.6% forecast median in a MNI survey.
The September growth rate was the third highest this year, only behind August's
rise and January's 2.5% increase.
     On a monthly basis, the CPI rose 0.5%, the second-strongest growth of the
year behind January's 1% increase and slightly higher than the 0.4% growth in
August.
     From January through September the CPI rose 1.5%.
     Growth in the y/y CPI was hurt by a drop of 1.4% in food prices, the eighth
consecutive decline and the largest drop since May, when it was 1.6%. Among food
categories, meat prices declined 7.5%, and fruit and vegetable prices were down
3% and 1%, respectively. 
     Non-food categories, however, rose by 2.4%, led by hikes in health-care
prices (+7.6%), housing (+2.8%), education and entertainment (2.3%), living
goods (1.4%) and other goods and services (+1.4%). The increase in health-care
prices was the highest since 1997, according to China Industrial Bank Research.
     The CPI m/m growth was driven by rises of both food prices, at 0.5%, and
non-food prices, also at 0.5%.
     "As the National Day holiday and Mid-Autumn Festival approached, demand
[for food] increased," Sheng Guoqing, senior statistician of the NBS, said in a
statement Monday. "Eggs, chicken, and pork prices grew 6.1%, 2.8% and 1%,
respectively."
     He also said fruit prices increased 1.9% m/m due to a supply reduction as
summer fades, contributing to the CPI m/m acceleration.
     Producer Price Index
     Producer prices accelerated to 6.9%, 0.6 percentage points higher than the
6.3% forecast median by 18 financial institutions surveyed by MNI. It was also
much higher than the 6.3% growth in August and the highest since March's 7.6%.
     The PPI rose 1% on a month-on-month basis, the highest since December's
1.6% growth. It was the third straight month that the PPI has been in positive
territory, following three straight months of m/m drops. 
     According to the NBS, PPI y/y growth was mainly due to price hikes in seven
industries, which underpinned 81.2% of the jump. Ferrous metal smelting and
flattening prices saw the highest growth at 31.5%, followed by the 28.6% price
increase in coal mining and washing, and the 20.2% price increase in non-ferrous
smelting and flattening. The other PPI y/y increases were seen in oil processing
(16.4%), oil and natural gas mining (14.2%), chemical raw materials and chemical
products (10%), and non-mental ore products (9.8%).
     The much smaller m/m PPI acceleration was driven by the recent rampant
price growth of paper-making and the paper product sector amid China's
environmental protection campaign.
     "It's due to the environmental protection examinations in September in
places such as Shandong and Zhejiang provinces, whose paper production volume
comprised 48% of the national total," China Industrial Bank said in a research
note on Monday.
     TF Securities said in a note that China's environmental protection
measures, which place curbs on production, would continue to weigh on prices.
CPI m/m growth will continue to be driven by price growth of livestock and
aquaculture, which are affected by pollution measures. 
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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