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Price increases are a matter of perspective

by 5m Editor
28 September 2007, at 10:25am

CHINA - Though the consumer price index (CPI) keeps rising rapidly, the producer price index (PPI), a leading indicator of production costs, shows a declining trend. This suggests that the increase in the CPI is mainly the result of price hikes for food. The decline of the growth rate for non-food prices shows that supply and demand are stable, providing the basis for a gradual descent in prices later this year.

According to the National Bureau of Statistics, the PPI grew by 2.4 percent in July, compared with 3.3 percent in January. The PPI growth was 0.2 percentage points higher in August than in July, but the overall trend is still downward.

The slowing growth in the PPI is mainly the result of declining production costs. Though the cost of living rises with food prices, the slowing growth of production costs means an overall trend of slow growth of the PPI.

The rate of CPI growth hit 6.5 percent in August, leading to 3.9 percent year-on-year growth from January to August. Higher food costs have led the faster rate of CPI growth. The prices of industrial consumer goods and services have risen by less than 1 percent this year, while food prices have soared, which has been a major factor in increasing the CPI growth rate.

Source: ChinaDaily

5m Editor