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Consumer inflation rose 5.2 percent on-year last month, slightly down from 5.4 percent the month before, which was the highest since October 2011. The reading was in line forecasts in a Bloomberg News survey.

World

China inflation slips but stays high on virus, food worries

BEIJING, China, Mar 10 – The soaring price of pork and other food, as well as the rising cost of medical supplies during the coronavirus outbreak kept Chinese consumer inflation close to eight-year highs in February, officials said Monday.

And analysts said the figure would likely remain elevated for some time as measures put in place around the country to contain the deadly outbreak have put a huge dent in supplies of key goods.

However, the factory prices fell and observers warned of further drops as global demand for Chinese goods is battered by the spread of the disease.

Consumer inflation rose 5.2 percent on-year last month, slightly down from 5.4 percent the month before, which was the highest since October 2011. The reading was in line with forecasts in a Bloomberg News survey.

Food prices rose almost 22 percent, with pork increasing 135 percent — following a 116 percent rise in January — as the country’s pig herds are ravaged by African Swine Fever that has seen millions of pigs culled.

The National Bureau of Statistics also said medical goods had seen a rise as officials grappled with the coronavirus, which has infected more than 80,000 people and killed more than 3,000. The price of disinfection products increased 14.8 percent from January.

“The sudden new coronavirus epidemic caused a more complex impact on price movements in February,” said Zhao Maohong, director of the urban department of the statistics bureau.

Consumers were encouraged to stay home over an extended Lunar New Year holiday to avoid infections and businesses suspended operations. Cities also imposed various travel restrictions.

The producer price index — a barometer of the industrial sector that measures the cost of goods at the factory gate — fell 0.4 percent, slightly more than expectations of a 0.3 percent drop.

Iris Pang, ING chief economist for Greater China, told AFP that “factories almost stopped operation in February”, leading to expectations of a fall in prices.

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She added that both indexes are expected to fall in March because of lower energy prices after a rout on oil markets.

But Pang said, “this may not be a good thing for all companies as some depend on higher oil prices to have higher profits”. She said she expects prices to normalize as people return to work and are more willing to spend.

And United Overseas Bank economist Ho Woei Chen pointed out that non-food CPI “moderated quite sharply to 0.9 percent, from 1.6 percent in the previous month”.

“This is an indication of weaker demand in China,” she told AFP.

Julian Evans-Pritchard of Capital Economics said core inflation, which strips out both food and energy prices, fell to a nine-year low, suggesting the virus outbreak “led to a marked weakening in demand-side price pressures”.

“Especially noteworthy is the steep decline in both transportation and services inflation,” he added in a report.

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