Summary of China CPI changes for September

Published on Author reed

Consumer price index indicators are out for September and prices have risen by 3.1% year-over-year. The price index separates out rural and city price changes, which were 3.3% and 3.1% respectively. The month-on-month price changes reflected a rise of the same amount, 0.8%,  in cities as well as in rural areas leading to an overall increase of .8% for the month of September month-on month.

Food prices accounted for almost 60% of the increase in the price index, rising 6.1% year-on-year. This increase accounted for 1.98% of the year-on-year increase, with vegetables prices up by 18%, meat and poultry up by 6.6% and fresh fruit up by 12.5%. The price of tobacco and liquor, sometimes referred to as vice goods because their consumption is thought to increase when uncertainty is rising, has fallen by .2% year-on year, with liquor falling by .8% and tobacco rising by 0.3% As china continues to build out its infrastructure, the price of communication and transportation also decreased by 0.2% year-on-year, with communication facility costs down by 7%, transportation facilities down by 1.2% and vehicle, vehicle maintenance and fuel costs all up slightly. Month-on-month, the cost of tobacco and Liquor fell by 0.2%, household/maintenance services prices were even at 0.0% and all other indices rose, led by food (1.5%), clothing (1.2%), and recreation/education services (1.0%).



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2 Responses to Summary of China CPI changes for September

  1. The fact that Chinese inflation is being increasingly derived from food related sources does provide the central bank with some breathing room. Initially when I read the headline CPI reading, as well as comments that Chinese house price appreciation has been realizing strong growth, I thought that was a clear signal that the People’s Bank of China would look to tighten its monetary policy to mitigate the inflation reading. However, although I do think China will tighten policy to slow the rate of credit growth within the economy, food price changes tend to be more transient relative to other forms of inflation. The precise reason why food price changes are considered non-core CPI. The Fed is less inclined to respond to non-core swings in price, so I would guess that Chinese central bankers act in a similar way. Still, if food prices remain elevated for an extended period of time, this may induce more widespread inflation throughout core goods and services.
    Returning to Mark’s post below regarding rice production, if supply is shrinking and demand is expanding, one would expect rice prices to elevate. However, he points out that other agricultural products are realizing improved output, so that cannot be the whole story. Rather, a 6.1% increase in food prices where agricultural production has been relatively constant year-over-year is not surprising given that the economy is expanding 7.8% and the average income per capita is rising even faster. This sort of growth should be generating more demand, transitively increasing the equilibrium price for agricultural produce.