Food Sector Gives Much Needed Impetus to Consumer Prices in China

Published Date : Dec 09, 2015

The Consumer Price Index (CPI) in China rose to a tepid 1.5% in November from where it stood a year ago, as revealed in the data released on Wednesday. The numbers exhibited were slightly better than the outcome of a Reuter’s poll, forecasting rise at 1.4%. 

According to the latest data, the Producer Price Index (PPI) of China dropped to 5.9% in November. While CPI remained constant the month before, despite predictions from economists of 0.1%, while PPI on October declined to 0.5%.

The rise in consumer prices registered in November was to large extend driven by the uptick in the food prices. Food CPI on November rose up to 2.3%, while the CPI of non-food item rose to a meager 1.1%. 

However, producer prices in China continued to decline as the manufacturing sector remained stagnate, impelling companies to reduce their wholesale prices in order stay competitive in their businesses. 

Furthermore, the data released on Tuesday demonstrated the export slump in China was more than it was expected in November, while he imports also declined. With this China entered in the fifth straight month witnessing falling exports. 

Senior international economist for PNC Financial Services, Bill Adams said that year-on-year fall in producer prices not just engulfed industrial goods sector such as petroleum and petrochemicals, but it also included value-added international commodities such as computers and autos. 

Adams also noted that the decline in prices of tradable commodities is likely to mount pressure on the Chinese government to devalue yuan further, because a fragile currency standards can put an upward pressure on costs of tradable products and relax deflationary risks. People’s Bank of China already had set a mid-point rate for yuan on Wednesday, which is at its lowest in more than four years.