Chinese Consumer Inflation Rising, PPI Still High

China's CPI increased due to rising prices of non-food items. Meanwhile, PPI remained near record highs, although slightly sloping.

On Monday (11/April), China's National Bureau of Statistics released data on consumer inflation (CPI), which increased 1.5 percent on an annual basis (Year-over-Year) in March. This figure increased quite significantly from the previous month, and exceeded economists' expectations for a 1.2 percent increase.

When compared to previous years, the current trend of Chinese consumer inflation has been much sloping. This is because pork stocks which were previously very limited due to the African swine fever outbreak have now returned to normal. This condition underlies the decline in pork prices by 41.4 percent on an annual basis in March. As a result, it's not surprising that food prices fell by 1.5 percent.

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On the other hand, prices for non-food items soared 2.2 percent. Staple goods also experienced an increase, such as flour (+1.7 percent), vegetable oil (+0.6 percent), fresh vegetables (+0.4 percent), and eggs (+0.3 percent). The increase in the price of basic commodities was more due to the increase in the commodity prices of wheat, corn and soybeans on the international market.

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Core inflation, which excludes food and energy prices, rose 1.1 percent on an annual basis in March, unchanged from the increase in the previous month. Core inflation is data that policy makers pay close attention to because it does not take into account food and energy prices which tend to fluctuate, thus reflecting more on economic conditions.

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Separately, producer inflation data (PPI), which was also released this morning, showed an increase of 8.3 percent from the previous year. Although slightly sloping compared to the 8.8 percent increase in February, historically, China's PPI is still near a multi-year high. China's producer inflation is still too high due to supply chain and distribution disruptions caused by the pandemic.