China Inflation August 2021


China: Consumer price inflation declines to lowest level since March in August

September 9, 2021

Consumer prices increased 0.10% in August over the previous month, moderating from July's 0.30% rise. In August, lower non-food prices partially offset higher food prices

Consumer price inflation came in at 0.8% in August, which was down from July’s 1.0%. August's result represented the lowest inflation rate since March. Accordingly, the trend pointed down slightly, with annual average inflation coming in at 0.6% in August (July: 0.7%). Finally, producer price inflation rose to 9.5% in August, from July’s 9.0%, amid elevated price pressures for raw materials and energy. This is despite government efforts in recent months to tame producer prices, such as through releasing commodities from state reserves and cracking down on hoarding.

Looking ahead, producer price inflation should stay elevated in H2 notwithstanding government measures, amid resurgent global demand and supply constraints. Regarding consumer prices, panelists see a pickup later this year, although improved pork supply due to farmers rebuilding their hog herds in the wake of African swine fever will keep a lid on the increase.

On producer prices, Ho Woei Chen, economist at United Overseas Bank, commented:

“The strong momentum and low base effect suggest that PPI inflation is likely to top out only in October. […] The government’s 'common prosperity' agenda, focusing on income distribution and social welfare will also strengthen the resolve to contain property price gains and as such, construction demand and thus steel prices may have room to ease.”

FocusEconomics panelists forecast that consumer price inflation will average 1.5% in 2021, which is down 0.1 percentage points from last month’s estimate, and 2.3% in 2022. Producer price inflation is forecast to average 6.4% in 2021, which is unchanged from last month’s forecast, and 2.3% in 2022.


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China Inflation Chart

China Inflation August 2021

Note: Annual and monthly variation of consumer price index, and annual variation of producer price index, in %.
Source: National Bureau of Statistics of China (NBS).

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