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Heat Wave Leading to Hot Prices

14 August 2013

CHINA - A persistent heat wave over East and South China is killing vegetables and pushing food prices higher but will not cause dramatic inflation, economists said.

Autumn grain output and pork prices will be important factors affecting inflation, but their prices will not rise dramatically, said Liu Chunyuan, associate dean of the School of Economics at Renmin University.

Mr Chunyuan said sluggish growth and weak demand will not create the possibility of a sharp rebound in inflation.

Food prices have been a major factor creating high inflation in China. The National Bureau of Statistics said food prices were actually not a big element in the consumer price index in early 2011.

Tang Jianwei, an economist with the Bank of Communications, said although food prices may increase in August, the pressure of wider inflation will be offset by a stronger consequential effect.

"The price for fresh vegetables may keep going up if high temperatures linger, but CPI growth will be stable or even fall," said Dr Jianwei.

The CPI growth rate in August 2012 was 2 per cent, higher than the 1.8 per cent in July this year. This August will see it even lower, he added.

A report released on Friday by the Chinese Academy of Social Sciences said 53 per cent of 100 surveyed economists believe inflation will rise during the remainder of the year. 40 per cent of them said prices will stay generally stable.

According to the National Bureau of Statistics, China's consumer price index, a main gauge of inflation, grew 2.7 per cent year on year in July, staying flat from June.

Food prices, which account for one-third of the prices used to calculate the CPI, saw steeper growth than other, non-food, categories, including clothing, home appliances and daily necessities.

The price of meat and poultry products rose by 5.9 per cent, pushing the CPI up by 0.42 per cent. Fresh vegetables are 11.8 per cent more expensive, raising the CPI by 0.32 per cent.

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