Consumer prices rise in China as Covid spurs food stockpiling

BEIJING – China’s consumer and producer prices rose more than expected in April, according to data from the National Bureau of Statistics released on Wednesday.

The CPI rose 2.1% last month compared to a year ago, buoyed by higher prices for energy and fresh vegetables. The reading beat expectations of a 1.8 percent increase in a Reuters poll.

The April number was also the highest since November’s reading of 2.3% and well above the 18-month average of 0.9% consumer price inflation. The official target for China’s CPI for 2022 is “about 3%”.

“The main driver was higher food prices due to higher transportation costs and restocking demand from more stringent Covid restrictions,” Goldman Sachs analysts said in a report on Wednesday.

“On an annual basis, we expect CPI inflation to rise and PPI inflation to decline based on underlying effects,” the report said. “CPI inflation may decline sequentially in the near term as inflationary pressures from food prices may ease as the COVID situation in China improves.”

Since March, mainland China has tightened travel restrictions and imposed stay-at-home orders in many parts of cities to contain the worst outbreak of the Covid virus in the country since early 2020. The controls have prevented many factories from producing at full capacity or moving goods between suppliers and customers.

Fresh vegetable prices rose 24% year-over-year in April, while fresh fruit prices rose 14.1% over that period. Pork prices, a major contributor to China’s CPI, posted a relatively rare 1.5% increase from the previous month, versus a more moderate year-over-year decline of 33.3%.

Fuel prices for transportation are up 28.4% from the previous year, reflecting the recent rise in oil and commodity prices.

However, China’s high CPI does not mean that local residents face the same The pressure that the Americans do.

Consumer prices in the United States are at their highest levels since the early 1980s, even when food and energy are excluded. The April number, due out later on Wednesday, is expected to stay close to It saw an 8.5% increase over decades in March.

In China, excluding food and energy prices, the CPI rose 0.9% in April compared to a year ago.

In the longer term, analysts warn that overall consumer demand in China remains low due to uncertainty about future income.

Some companies even lowered prices to attract buyers.

Companies have cut prices at the fastest pace since May 2020, “with a number of companies cutting their fees in order to attract new business amid muted demand conditions,” a statement from the April Caixin Services PMI – a monthly sentiment survey – said.

A similar survey of manufacturers found that despite a sharp rise in the cost of production, selling prices rose only modestly as companies tried to remain competitive and attract new business.

In late April, the company lowered its GDP target for China to 4.2% based on expectations that Covid controls disrupting supply chains will last longer. This is down from Prediction of 4.6%.