China’s deflation eased in Aug as consumer prices returned to growth, factory-gate prices fell at slower pace

 

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China’s consumer prices returned to growth in August while factory-gate price declined at a slower pace, as deflation pressures ease amid signs of stabilisation in the economy.

Consumer prices returned to growth, with CPI rising by 0.1% in August from a year earlier, compared to the 0.3% drop in the previous months and slower than the 0.2% growth expected by analysts, according to data released by the National Bureau of Statistics (NBS) on Saturday.

Food prices fell 1.7% on year while non-food costs rose 0.5% – led by rising costs linked to tourism, the bureau said.

Pork prices rose 11.4% month-on-month, versus no change in July, due to the impact of extreme weather in some areas. They were down 17.9% from a year earlier, narrowing from a 26% drop on July.

Core inflation, which excludes food and fuel prices, was unchanged at 0.8% in August.

The pick-up in CPI growth was partly driven by service prices amid the strong travel demand in the first summer vocation after the three-year Covid restrictions were lifted. According to NBS data, service price grew by 1.3% in August from a year earlier, expanding by 0.1 percentage point from the previous month, and in particular, prices of air tickets, tourism service and hospitality surged by 17.6%, 14.8% and 13.4%, respectively, all accelerating from the previous month .

On a month-on-month basis, China’s CPI rose 0.3%, picking up from 0.2% in July, the NBS said.

China’s factory-gate prices fell at a slower pace in August, with PPI falling by 3% in August from a year earlier, compared to 4.4% drop in the previous month, according to the data.

With early signs of growth stabilisation, we see deflationary pressures easing, a trend reflected in higher commodity prices in August,” ANZ analysts said in a note.