Economists expect China’s consumer-price index to show that inflation rebounded in July as vegetable and other food prices spiked due to flooding, but inflation pressures are expected to subside in the months ahead.
China’s consumer price index is expected to have risen 3.4% in July from a year earlier, up sharply from June’s 2.9% increase, according to the median forecast of 10 economists.
The National Bureau of Statistics is due to issue the data Wednesday.
Economists attributed the expected CPI increase to a 12% rise in vegetable prices from June to July because of severe flooding in various regions across China. Food products make up a large portion of the basket of goods used to calculate the CPI. But vegetable prices already started to fall by around 1% in the last week of July, according to data from the Ministry of Commerce, and economists see no reason for the People’s Bank of China to become alarmed by inflation.
“We are sure the maturing PBOC won’t react to this inflation spike at all,” Bank of America-Merrill Lynch economist Lu Ting said in a note. Lu expects China’s average CPI rise this year to be 2.9%, just below Beijing’s official target of 3%.
Underscoring the fading inflation threat, the producer price index — a measure of factory-gate prices – was forecast to have risen 5.4% in July from a year earlier, down from June’s 6.4% increase, according to the poll.
Other data due Wednesday will likely show a continued slowdown in economic activity due to government measures to restrict property speculation, and to phase out polluting or energy-intensive industry in order to meet economywide energy-efficiency targets.
Industrial production growth was expected to have slowed to 13.2% in July from 13.7% in June, and urban fixed-asset investment growth in the January-July period was predicted to have risen 25.3%, a slightly slower pace than the 25.5% rise in the January-June period, the poll found.
The extent of the slowdown in industrial production will be closely watched “as a bellwether both for construction-sector activity and China’s commodity demand,” Capital Economics said in a note.
