China Inflation Hits 29-Month High

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

China’s central bank has been trying to bolster growth while avoiding aggressive loosening that could fan price pressures and risk outflows, as the Federal Reserve and other central banks raise interest rates to fight soaring inflation.

Consumer prices rose an expected 2.8 percent from a year earlier, accelerating from 2.5 percent in August and climbing at the fastest pace since April 2020, data from the National Bureau of Statistics showed on Friday.

Yet underlining weak consumption amid COVID-19 curbs, the core inflation—which excludes volatile food and energy prices—slowed to 0.6 percent in September from 0.8 percent in August.

The producer price index (PPI) rose 0.9 percent year-on-year, easing sharply from a 2.3 percent rise in August and hitting the weakest since January 2021. Analysts had expected a 1.0 percent rise.

“Headline CPI inflation [on a year-over-year basis] is likely to stay moderate in the coming months on both a high base and subdued services demand,” analysts at Goldman Sachs said in a note.

“We expect year-over-year PPI inflation to continue to fall on both base effects and eased inflationary pressures due to lower commodity prices.”

The central bank is likely to focus on spurring the COVID-ravaged economy, although worries over capital flight could limit its policy space, as the yuan has fallen about 11 percent against the U.S. dollar so far this year.

“The main constraint at the moment is the Renminbi, which is close to its weakest level in over a decade. We don’t expect policy rate cuts until pressure on the currency eases,” Capital Economics said in a research note.

Food was largely behind last month’s inflation pickup, with prices up 8.8 percent on year after a 6.1 percent gain in August. Pork prices leapt 36.0 percent after rising 22.4 percent the month before and vegetable prices jumped 12.1 percent after a 6.0 percent rise in August.

On a month-on-month basis, consumer prices rose 0.3 percent after a 0.1 percent fall in August, also supported by a monthly rise in pork prices.

The International Monetary Fund on Tuesday cut its 2022 and 2023 economic growth forecasts for China to 3.2 percent and 4.4 percent, respectively, saying the frequent lockdowns under the country’s zero-COVID policy have taken a toll.