CPI expected to see milder rise in March
- By Wu Jin
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E-mail China.org.cn, March 13, 2018
Despite a surge in China's consumer price index (CPI) in February, many experts are expecting the index to fall back to normal growth this month.
Jiang Chao, the senior economist of Haitong Securities, said the CPI increase was driven up in February by extreme weather conditions and festive consumption, two short-term interventions which are not expected to influence the index's trajectory this month.
"Prices often rise and fall rapidly around the Spring Festival," Jiang explained.
According to Jiang, the CPI is expected to resume normal growth, displaying a negative increase compared to one month earlier, with a drop in year-over-year growth from 2.9 percent in February to 2.5 percent in March.
From March on, despite stable fruit prices, the price of fresh vegetables is expected to fall due to diminishing demand. The price of pork will likely drop as well, Jiang forecast.
Xie Yaxuan, the chief analyst of macro-economy from China Merchants Securities, said February's CPI represents the first inflation peak of the year, with the second expected mid-year, depending mostly on the price of commodities such as pork and crude oil.
According to Xie, holiday consumption and winter weather conditions last month had an even greater impact on the market than expected.
In February, fresh vegetable and fruit prices surged by 18.1 percent and 6.4 percent respectively, and the price of aquatic products and meat grew by 8 percent and 2 percent, all of which together led to 70 percent of the month-over-month growth, equal to 0.82 percentage points of CPI's monthly increase.
"Food prices generated a month-over-month change of 4.4 percent in February," Xie said.
Lian Ping, the chief economist of the Bank of Communications, said that despite the variable impact of the holiday season and weather, fundamental market factors, such as the supply and demand ratios, remain largely unchanged.
"Growths outweighing the 2.9 percent hike in February are unlikely to occur in the following months," Lian said.
According to him, even though the CPI's year-over-year growth in February was much higher than the 1.6 percent registered a year before, at 2.9 percent the index remains under the ceiling of 3 percent, effectively eliminating it as a major concern for economic operations in 2018.
In February, when the producer price index (PPI) dropped by 0.1 percent month-over-month, it still maintained a growth of 3.7 percent year-over-year, despite a growth rate 0.6 percentage points lower than that of a month earlier.
Lian also expects a decline in the PPI's year-over-year growth, which has fallen in the past four consecutive months. In February, the month-over-month growth rate also fell for the first time in eight months, Lian pointed out.
According to the expert, the prices of steel and cement won't drop immediately due to overcapacity reduction and environmental protection measures. He added that although the PPI grew less drastically than the previous year, negative growth is unlikely to emerge.
According to Jiang, the price of steel has bounced slightly upward, coal has stopped its rise and crude oil has kept to lower prices, which taken together means the PPI in March is expected to drop by 0.5 percent month-over-month and register a slower growth of 2.8 percent year-over-year.
