13 June 2017
China Sourcing Update: Major Price Indicators (May 2017)
- CPI growth quickens in May
The year-on-year growth rate of China’s consumer price index (CPI)1 went up from 1.2% in April to 1.5% in May, which was in line with market expectations (see exhibits 1 & 2).
The acceleration in the CPI growth in May was mainly attributable to a slower decline in vegetable prices. The year-on-year growth in vegetable prices, a major driver of China’s inflation, improved markedly from minus 21.6% in April to minus 6.3% in May. Consequently, the year-on-year growth in the food component in the CPI also picked up from minus 3.5% in April to minus 1.6% in May. Meanwhile, the year-on-year growth in the non-food component in the CPI edged down from 2.4% in April to 2.3% in May, largely due to slower price increases in tourism and transportation services.
Looking ahead, we predict that the food deflation will slow further and eventually disappear in the near future, as the year-on-year growth of vegetable prices is expected to return to the positive territory soon; meanwhile, we expect the non-food inflation to ease in the near term as the recent declines in domestic ex-factory prices will be translated into weaker non-food prices. Overall, in our view, the CPI growth is likely to rise slowly and stay below 2% in the coming months.
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