China Inflation


Inflation eases in August

In August, consumer prices added 6.2% over the same month the year before, which was in line with market expectations. The August print came in below the three-year high 6.5% tallied in July and thus broke the upward trend in place since April this year. The main factor behind the drop in inflation was slower foodstuff price increases, which eased from a 14.8% spike in July to rise 13.4% in August, as pork prices increased at a slower pace. In contrast, overall inflation excluding food inched up from 2.9% in July to 3.0% in August. Owing to the high inflation levels recorded in recent months and despite the moderation seen in August, annual average inflation rose to 5.2% (July: 5.0% yoy), which represented the highest level since January 2009. Meanwhile, producer price inflation edged down from 7.5% in July to 7.3% in August, which was, nevertheless, slightly up from market expectations of a 7.2% rise. Despite the moderation in August, annual average producer price inflation climbed to 6.5% in August from 6.2% in July. According to some analysts, inflation peaked in July and it is likely to start a downward trend in the months ahead, supported by the effects of domestic policy tightening as well as more subdued external demand. The government set an inflation target of 4.0% for this year.

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