CHINA inflation slips but stays high on virus, food worries

CHINA inflation slips but stays high on virus, food worries

March 10, 2020 0 By mykenyancareers

BEIJING, China, Mar 10 – The soaring price of pork and other food, as well as the rising cost of medical supplies during the coronavirus outbreak kept Chinese consumer inflation close to eight-year highs in February, officials said Monday.

And analysts said the figure would likely remain elevated
for some time as measures put in place around the country to contain the deadly
outbreak have put a huge dent in supplies of key goods.

However, the factory prices fell and observers warned of
further drops as global demand for Chinese goods is battered by the spread of
the disease.

Consumer inflation rose 5.2 percent on-year last month, slightly down from 5.4 percent the month before, which was the highest since October 2011. The reading was in line with forecasts in a Bloomberg News survey.

Food prices rose almost 22 percent, with pork increasing 135
percent — following a 116 percent rise in January — as the country’s pig herds
are ravaged by African Swine Fever that has seen millions of pigs culled.

The National Bureau of Statistics also said medical goods
had seen a rise as officials grappled with the coronavirus, which has infected
more than 80,000 people and killed more than 3,000. The price of disinfection
products increased 14.8 percent from January.

“The sudden new coronavirus epidemic caused a more complex impact on price movements in February,” said Zhao Maohong, director of the urban department of the statistics bureau.

Consumers were encouraged to stay home over an extended
Lunar New Year holiday to avoid infections and businesses suspended operations.
Cities also imposed various travel restrictions.

The producer price index — a barometer of the industrial
sector that measures the cost of goods at the factory gate — fell 0.4 percent,
slightly more than expectations of a 0.3 percent drop.

Iris Pang, ING chief economist for Greater China, told AFP
that “factories almost stopped operation in February”, leading to
expectations of a fall in prices.

She added that both indexes are expected to fall in March
because of lower energy prices after a rout on oil markets.

But Pang said, “this may not be a good thing for all companies as some depend on higher oil prices to have higher profits”. She said she expects prices to normalize as people return to work and are more willing to spend.

And United Overseas Bank economist Ho Woei Chen pointed out
that non-food CPI “moderated quite sharply to 0.9 percent, from 1.6
percent in the previous month”.

“This is an indication of weaker demand in China,”
she told AFP.

Julian Evans-Pritchard of Capital Economics said core
inflation, which strips out both food and energy prices, fell to a nine-year
low, suggesting the virus outbreak “led to a marked weakening in
demand-side price pressures”.

“Especially noteworthy is the steep decline in both
transportation and services inflation,” he added in a report.