Friday, June 13, 2008

China's Inflation Rate Declines

China's CPI down from 8.5% in April to 7.7% in May, first time to slip below 8% in four months. More reports from the WSJ:

Food prices, a key component in the price index, rose 19.9% in May from a year earlier. But that was down slightly from a 22.1% increase in April. It said fresh vegetable prices fell 15.7% from a year ago. Nonfood prices climbed 1.7 percent, compared with 1.8% in April, the statistics bureau said.

Lower CPI numbers did not translate into any comfort at all because there are some quarters still worry about inflation as PPI numbers suggest non-food inflation is creeping in.

n Wednesday, authorities said China's producer price index for May-- an indicator of wholesale and raw material prices -- rose to 8.2% from April's 8.1 percent, boosted by double-digit increases in prices of oil, coal, steel and other industrial materials.

Many still expect China to continue to crack down on inflation as they see some suppression of price is going on.

"While agriculture seems now to be responding … there are other price pressures out there that are being severely repressed," Stephen Green, China economist for Standard Chartered Bank in Shanghai, said in report Thursday.

Chinese retail gasoline and diesel fuel prices were raised about 11% in November but have remained frozen since, despite surging crude oil prices. In January, food processors were ordered to get approval for any price hikes, and fertilizer prices have been frozen to protect farmers.

Well, I think many still expect RMB continue to appreciate to combat inflation. Many call for a quick one-off appreciation to slow down "hot money".

1 comment:

Raymond said...

So it is? China's fuel and energy prices are heavily subsidised by the government. The true inflation picture could be worse than the reproted 7.7%