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egetable prices in China have risen significantly this summer, with analysts pointing to high temperatures and frequent rainfall as the main reasons.
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BEIJING — China on Monday reported its consumer price index rose by 0.6% year on year in August, missing expectations as transportation and home goods prices, as well as rents declined.
The CPI was estimated to have climbed 0.7% year on year in August, according to a Reuters poll.
Food prices climbed by 2.8% year on year in August, the first positive print since June 2023, according to Wind Information data. Pork prices surged by 16.1% in August, while vegetable prices climbed by 21.8%.
Pork, a food staple in China, has an outsized weighting in the country’s consumer price index. Wang Yifan, agricultural analyst at Nanhua Futures, said that breeding cycles indicate pork prices can rise further in September and October, but will face pressure during the rest of the year.
Core-CPI, which strips out food and energy prices, climbed by 0.3% in August from a year ago, a slower rise for a second-straight month.
The consumer price index rose by 0.4% in August from July, also missing Reuters estimates of a 0.5% growth.
Consumer prices in China have remained subdued amid lackluster domestic demand since the pandemic.
China’s former central bank head Yi Gang said at a conference on Friday that the country needed to focus on “fighting the deflationary pressure.” He forecast the consumer price index would be slightly above zero by the end of the year.
Retail sales rose by just 2.7% in July from a year earlier. Retail sales and industrial data for August are due out Saturday.
“The fiscal policy stance needs to become more proactive in order to prevent the deflationary expectations from becoming entrenched, in my view,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.
Producer prices fall more than expected
The producer price index fell by 1.8% year on year in August, more than the estimated 1.4% decline as per the Reuters poll.
Oil, coal and other fuel industries reported a 3% year-on-year drop in prices, reversing a 4.3% increase in July.
The downward pressure on the producer price index remains large due to insufficient domestic demand and the drag from real estate, said Bruce Pang, chief economist and head of research for Greater China at JLL.
Within the consumer price index, he noted that major categories outside of food, tobacco and alcohol posted declines in August from the prior month, indicating the need for greater efforts to boost domestic demand.
— CNBC’s Anniek Bao contributed to this report.
