Price pressures were largely absent or well contained in China in 2017.
In fact the latest data reveals that China closed out 2017 with no signs that rising producer price inflation was feeding through to consumer prices (helped by falls in pork and other food prices).
That suggests capacity cuts to old-growth industries such as coal mining and steel which accelerated in late 2017 can continue in 2018 without having to worry about boosting inflation in the wider economy.
But we have still to see if there is any lingering impact from the surge in gas (much of it LNG imports) demand and prices in the las months of 2017. That could see a boost to electricity prices for consumers in coming months.
Figures out Wednesday showed Chinese producer prices rose at their slowest pace in more than a year last month – they rose at an annual 4.9%.
That brought annual price growth for 2017 to the highest level since 2008, according to China’s National Bureau of Statistics and was slower than November’s rise of 5.8%.
The December reading brought annual producer price growth for 2017 to 6.3%, the fastest pace of annual inflation since 2007 and came after five years of contraction.
The statistics bureau said most (6.13 percentage points) of that annual rise was thanks to growth in the price of produced materials.
Prices for oil and natural gas extraction rose 29% over the year, while those for coal extraction and washing were up 28.2% and those for ferrous metals smelting and processing jumped 27.9%.
Those rises barely dented China’s official consumer price index which rose an annual 1.8%, unchanged from November.
Helping was an 8.3% fall in pork prices in the month.
Annual consumer inflation actually slowed 0.4% from 2016 to 2% in 2017, which was attributed mainly to falling in pork and fresh vegetable prices.
Those also helped produce the first annual fall in food prices for Chinese consumers since 2003. Cold weather this month could see prices rise in the next report.
