BEIJING--Inflation is merely creeping higher in China, according
to the official data, but consumers are feeling a more intense
sting from surging living costs, exacerbated by the impact of the
trade fight with the U.S. on prices and economic growth.
China's consumer inflation accelerated for the fourth straight
month in September, up 2.5% year-over-year to hit a seven-month
high, the National Bureau of Statistics said Tuesday, driven by
gains in food prices and higher fuel prices. September's official
reading is up on the 2.3% gain in August, but slightly lower than
economists' expectations.
Though the official number is well below the government's target
of about 3% this year, consumers and economists say the figures
fail to reflect the real rise in living costs, with rental prices
jumping in big cities this summer and expenses in education, health
care and other service sectors also on the rise.
While official data has rental costs rising by less than 3% this
year, the China Real Estate Association, a government-backed
industry group, says rents have soared more than 10% in the period.
A quarterly survey of urban consumers by China's central bank
released last month shows that more people--almost two-thirds of
those polled--expect to feel pressure from price rises in the
coming months.
"Inflation pressure in China may have been underestimated," said
Fan Lei, an economist at Sealand Securities. "Consumers definitely
feel the pressure, though official data may not fully show it."
While China's inflation isn't considered by economists to be a
major policy concern--and there are currently no widespread fears
of stagflation, a scenario in which economic growth slows while
inflation rises--it could become a problem for the government.
Rising inflation leaves less room for the central bank to further
stimulate growth as it tries to combat external shocks from the
trade dispute with the U.S.
With income growth slowing, rising prices bite into Chinese
consumers' discretionary expenditure, which could weaken
consumption--a recent economic growth driver that Beijing is trying
to bolster.
Liu Chang, a 35-year-old mother of two and a marketing
professional for a multinational company in Beijing, said she is
feeling the higher cost of food in particular this year. "Before,
50 yuan [$7.23] was enough to buy vegetables for my family's weekly
consumption. Now, it's only enough for three days," she said.
According to the official data, food prices rose 3.6% in
September compared with a year earlier, after climbing 1.7% in
August. Fresh vegetable and fruit prices rose more than 10%, and
combined to push the headline index more than half a percentage
point higher.
Still, inflation could actually ease in the coming months, said
China Merchants Securities analyst Lin Shu, as better weather
boosts supplies of vegetables and fruits, and because of a higher
base for comparison in the same period last year.
Such seasonal factors, however, may mask a fundamental shift in
the Chinese economy: Lower production output due to Beijing's
supply-side reforms and rising labor costs could stoke inflation in
the long run, according Mr. Fan of Sealand Securities.
Meanwhile, China's import prices, from soybeans to oil, are on
the rise due to the trade dispute, economists say. The Trump
administration this year has imposed tariffs on $250 billion of
Chinese goods, prompting Beijing to retaliate with tariffs on $110
billion of U.S. goods. President Trump has said he is ready to
extend the tariffs to a further $257 billion of Chinese products,
meaning they would cover essentially all U.S.-bound Chinese
goods.
China's consumer inflation may rise further next year as more
tariffs loom, said Tommy Xie, an economist at OCBC, but he
dismissed concerns of stagflation. Economists polled by The Wall
Street Journal expect China's gross domestic product to rise 6.6%
in the third quarter from a year earlier, a tick down from the
second quarter's 6.7%.
Still, some are concerned about where the economy is heading.
"There are no clear barometers as to what levels of inflation and
growth qualify as stagflation, but the trend is clear: Prices are
rising while economic growth is slowing," said Jianguang Shen, an
economist at JD Finance.
Nonfood prices--a main driver of CPI this year--increased 2.2%
from a year earlier in September, moderating from a 2.5% on-year
increase in August. Transportation fuel prices surged by 20.8% on
year, extending August's 19.4% rise and leading gains in nonfood
prices, the bureau said.
Rental costs, a component of nonfood prices, rose 2.6% in
September, the statistics bureau said. The China Real Estate
Association's data put last month's growth at 16%. Analysts have
said differences in sampling and statistical methods may explain
the sharp discrepancy.
Zhang Xi, a 28-year-old white-collar worker who moved from Hong
Kong to Beijing in May, said high rents in the Chinese capital have
made her consider moving again. "Rents in Hong Kong were also very
high, but the average income is also higher than Beijing," Ms.
Zhang said.
Liyan Qi, Grace Zhu and Lin Zhu
(END) Dow Jones Newswires
October 16, 2018 05:41 ET (09:41 GMT)
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