China: Consumer Prices Rise in August, PPI Stuck in Deflation

A woman shops in a supermarket, Beijing, China, Sept. 9, 2024 (EPA)
A woman shops in a supermarket, Beijing, China, Sept. 9, 2024 (EPA)
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China: Consumer Prices Rise in August, PPI Stuck in Deflation

A woman shops in a supermarket, Beijing, China, Sept. 9, 2024 (EPA)
A woman shops in a supermarket, Beijing, China, Sept. 9, 2024 (EPA)

China's consumer inflation accelerated in August to the fastest pace in half a year but the uptick was due more to higher food costs from weather disruptions than a recovery in domestic demand as producer price deflation worsened.

A sputtering start in the second half is mounting pressure on the world's second-largest economy to roll out more policies amid a prolonged housing downturn, persistent joblessness, debt woes and rising trade tensions.

The consumer price index (CPI) rose 0.6% from a year earlier last month, versus a 0.5% rise in July, data from the National Bureau of Statistics (NBS) showed on Monday, but less than a 0.7% increase forecast in a Reuters poll of economists.

Extreme weather this summer from deadly floods to scorching heat has pushed up farm produce prices, contributing to faster inflation, Reuters reported.

China's affected crops due to various natural disasters totaled 1.46 million hectares in August, state media reported on Monday.

“The higher CPI in August was due to high temperatures and the rainy weather,” NBS statistician Dong Lijuan said in a statement.

Food prices jumped 2.8% on year in August from an unchanged outcome in July, while non-food inflation was 0.2%, easing from 0.7% in July.

“But the rebound was softer than expected and did little to ease deflation concerns. Much of the improvement has been food reflation, which is susceptible to fluctuating weather conditions and capacity changes,” said Junyu Tan, North Asia Economist at Coface.

Core inflation, excluding volatile food and fuel prices, was 0.3% in August - the lowest in nearly three and a half years - down from 0.4% in July.

The consumer inflation gauge was up 0.4% month-on-month, compared with a 0.5% increase in July and missing economists' expectations of a 0.5% gain.

In unusually strong comments, China's ex-central bank governor Yi Gang urged efforts to fight deflationary pressure at the Bund Summit in Shanghai last week.

A national campaign to earmark $41 billion in ultra-long treasury bonds to support equipment upgrades and trade-in of consumer goods has proven lukewarm in spurring consumer confidence, with domestic car sales extending declines for a fourth month in July.

“These policies will take time to filter through, so a demand-led reflation is obviously not yet on the horizon,” Tan said.

Meanwhile, the producer price index (PPI) in August slid 1.8% from a year earlier, the largest fall in four months. That was worse than a 0.8% decline in July and below a forecast 1.4% fall.

“The ongoing deflationary pressures boil down into a broader problem of production surplus, which is still outstripping demand,” said Tan.

China's yuan dipped against the dollar on Monday as long-dated yields hit record lows after monthly inflation data added to economic worries and calls for fresh easing.



Egypt Quarterly Current Account Deficit Eases to $2.1 Billion on Higher Remittances

A man walks in front of the new headquarters of Central Bank of Egypt, in Cairo, Egypt, November 3, 2024. (Reuters)
A man walks in front of the new headquarters of Central Bank of Egypt, in Cairo, Egypt, November 3, 2024. (Reuters)
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Egypt Quarterly Current Account Deficit Eases to $2.1 Billion on Higher Remittances

A man walks in front of the new headquarters of Central Bank of Egypt, in Cairo, Egypt, November 3, 2024. (Reuters)
A man walks in front of the new headquarters of Central Bank of Egypt, in Cairo, Egypt, November 3, 2024. (Reuters)

Egypt's current account deficit narrowed to $2.1 billion in January to March 2025 from $7.5 billion in the same period a year earlier, the central bank said on Tuesday.

The central bank attributed the slimmer deficit to the increase in remittances from Egyptians working abroad, as well as a rise in the services surplus due to higher tourism revenue.

Oil exports declined to $1.2 billion, from $1.4 in the year earlier, while imports of oil products rose to $4.8 from $3.4 billion.

Egypt has sought to import more fuel oil and liquefied natural gas this year to meet its power demands after disruptions to gas supply led to blackouts over the last two years.

Concerns over supplies increased after the pipeline supply of natural gas from Israel to Egypt decreased during Israel’s air war with Iran last month.

Revenues from the Suez Canal, declined to $0.8 billion in the third quarter of the country’s financial year, from $1 billion the same time a year ago, as Yemeni Houthis' attacks on ships in the Red Sea continued to cause disruption.

The Iran-aligned group says it attacks ships linked to Israel in support of Palestinians in Gaza.

Meanwhile, Egypt’s tourism revenues reached $3.8 billion, compared to $3.1 billion in the same period in 2023/24.

Remittances from Egyptians working abroad increased to $9.3 billion, from $5.1 billion. The increase in remittances has helped to reduce the wider trade deficit.

Foreign direct investment hit $3.8 billion, compared to $18.2 billion in the same quarter a year before.

Egypt has suffered an economic crisis exacerbated by a foreign currency shortage, which forced it to undergo economic reforms under an $8 billion IMF program that included allowing its pound to depreciate sharply last year.