China’s consumer inflation hits two-year high

Consumer prices in China rose 2.5% year on year in June, beating economists’ expectations of a 2.4% gain, data from the National Bureau of Statistics revealed on Saturday.

Released figures show the strongest pace in two years, compared to 2.1% growth recorded in May. In June, food prices rose 2.9% yoy, while non-food prices rose 2.5% yoy last month, also up from 2.3% growth in May.

Though consumer demand remains weak due to China’s strict Covid control measures along with sporadic outbreaks, the acceleration in consumer prices is being attributed to rising pork and energy costs.

Pork is a key product in China’s consumer price index basket. Meat prices fell more slowly by 6% in June after falling 21.1% in May. On a monthly basis, pork prices increased by 2.9%.

“CPI continued to trend higher in June, climbing to its highest level in two years,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, told SCMP.

“We expect CPI inflation to continue to rise in the second half as the domestic economy recovers from the first half lockdown and the pork price cycle turns inflationary after a long deflationary spell.”

Meanwhile, the producer price index, which reflects the prices that factories charge wholesalers for produce, rose 6.1% in June but retreated from a 6.4% rise in May. This was ahead of expectations, with the PPI expected to rise 6%.

Chinese authorities have set a target for economic growth of around 5.5% this year, but analysts expect it will not be met, with GlobalData forecasting growth of 4.1% in 2022.