China Inflation Rate Slows to 6-Month Low


China's consumer price inflation slowed to a six-month low of 1.9 percent year-on-year in December 2018 from 2.2 percent in the previous month and below market consensus of 2.1 percent. The slowdown in inflation was mainly due to non-food prices, while food inflation remained at its lowest level in three months.

The politically sensitive food inflation came in at 2.5 percent in December, unchanged from the previous month's three-month low. Upward pressure came from fresh vegetables (4.2 percent vs 1.5 percent in November), fresh fruit (9.4 percent vs 13.3 percent) and eggs (0.7 percent vs 6.4 percent); while cost continued to fall for both edible oil (-0.3 percent vs -0.6 percent) and pork (-1.5 percent vs -1.1 percent). 

Non-food prices rose 1.7 percent in December, easing from a 2.1 percent increase in November, mainly due to a fall in transportation costs (-0.7 percent vs 1.6 percent) and a slowdown in health care prices (2.5 percent vs 2.6 percent) on lower oil costs and drug pricing reforms. Inflation also eased for: rent, fuel and utilities (2.2 percent vs 2.4 percent); education, culture and recreation (2.3 percent vs 2.5 percent); and household goods & services (1.4 percent vs 1.5 percent). Meanwhile, prices rose slightly faster for both clothing (1.5 percent vs 1.4 percent) and other goods and services (1.6 percent vs 1.5 percent). 

Annual core inflation, which strips out volatile food and energy prices, stood at 1.8 percent in December, unchanged from the previous month.

On a monthly basis, consumer prices were unchanged in December, also missing market consensus of 0.3 percent gain and following a 0.3 percent fall in November.

Considering 2018 full year, the inflation rate rose to 2.1 percent from 1.6 percent in 2017, still missing the government's target of around 3 percent.

Meantime, the producer price index in China increased 0.9 percent from a year earlier in December, much slower than a 2.7 percent rise in the previous month and missing market expectations of 1.6 percent. It was the lowest producer inflation since September 2016, as prices of means of production went up at a softer 1.0 percent (vs 3.3 percent in November), in particular raw materials (0.8 percent vs 4.6 percent), processing (0.8 percent vs 2.2 percent) and extraction (3.8 percent vs 9.2 percent). Also, consumer goods inflation edged lower to 0.7 percent from 0.8 percent, of which food production (0.9 percent vs 1.1 percent), clothing (1.6 percent vs 1.5 percent) and daily use goods (0.4 percent vs 0.8 percent). Cost of consumer durable goods went up 0.2 percent (vs 0.1 percent in November). On a monthly basis, producer prices fell 1.0 percent in December, after a 0.2 percent drop in November. For full 2018, the producer price index rose 3.5 percent, easing from a 6.3 percent advance in 2017.

China Inflation Rate Slows to 6-Month Low


National Bureau of Statistics of China | Rida Husna | rida@tradingeconomics.com
1/10/2019 9:29:23 AM