China Rising Food Prices Push up Inflation to One-Year High

China’s rising food prices pushed up inflation to a one-year high in the world’s second largest economy.

The consumer price index (CPI) unexpectedly rose to 2% in August from a year ago, mainly on higher food prices and not due to a pickup in economic activity.

On the back of that, the producer price index (PPI) fell 5.9% – marking its 42nd consecutive month of declines.

Deflation fears in China are growing as manufacturers continue to cut prices.

The PPI decline was the biggest drop since the global financial crisis in 2009 due to falling commodity prices and slumping demand.

Economists said the continuing fall in producer prices poses the risk of trickling through to consumer prices.

Meanwhile, pork prices which weigh heavily on consumer prices in China, rose from 16.7% last year to 19.6% in August, while vegetable prices surged from 9.7% to nearly 16%.

Economists are expecting the government to step up with more policy measures to stimulate the economy.

Speaking at the World Economic Forum in Dalian on September 10, Chinese PM Li Keqiang was the latest policymaker to reiterate that the government will continue to support the economy to ensure stable growth.