China inflation hits 29-month high

BEIJING – China’s consumer inflation rose in September to a 29-month high, driven mainly by pork prices.

As central banks such as the U.S. Federal Reserve (Fed) are raising interest rates to combat skyrocketing inflation, China’s central bank has taken aggressive steps that could add to price pressures and capital outflows. It is trying to boost growth while avoiding drastic easing.

Consumer prices are expected to rise 2.8% year-on-year, accelerating from 2.5% in August and rising at the fastest pace since April 2020, National Bureau of Statistics data showed Friday. I was.

However, core inflation, which excludes volatile food and energy prices, eased to 0.6% in September from 0.8% in August, underscoring weakness in consumption amid restraint from COVID-19. did.

The Producer Price Index (PPI) rose 0.9% y/y, plummeting from a 2.3% rise in August to its lowest level since January 2021. Analysts had expected him to rise by 1.0%.

“Headline CPI Inflation [on a year-over-year basis] Both the high base and subdued demand for services are likely to remain subdued in the coming months,” analysts at Goldman Sachs said in a note.

“We expect year-on-year PPI inflation to continue to decline due to base effects and easing inflationary pressures from lower commodity prices.”

The People’s Bank of China is likely to focus on revitalizing the economy devastated by the coronavirus, but fears of capital flight have left policy room behind, with the yuan depreciating about 11% against the US dollar so far this year. may be limited.

“At the moment the main constraint is the renminbi, which is nearing its weakest level in more than a decade. Stated.

Food has lagged far behind last month’s rise in inflation, with prices up 8.8% year-on-year, following a 6.1% rise in August. Pork prices rose 36.0% from a 22.4% rise in the previous month, while vegetable prices rose 12.1% from his 6.0% rise in August.

On a month-to-month basis, consumer prices rose 0.3% from a 0.1% decline in August, also supported by rising pork prices each month.

The International Monetary Fund on Tuesday lowered its 2022 and 2023 economic growth forecasts for China to 3.2% and 4.4% respectively.