August 21, 2006

China's agricultural products prices down while production costs up

China's meat prices in July fell 7.1 percent on-year and egg prices dropped 12.9 percent, according to China Daily's report last week.

The prices of edible oils and vegetables during July were also down by 3.3 percent and 3.5 percent, respectively, on July 2005 levels.

The fluctuation in food prices is supposedly seasonal with the newspaper forecasting that food prices may decline further in the coming months on strong supplies.

Food prices, which weigh heavily on China's monthly Consumer Price Index (CPI) calculation, increased just 0.6 percent on year for July, bringing down the CPI to an increase of 1 percent, compared to 1.5 percent in June.

On the other hand, China's July producer price index, which tracks prices of major production materials, has been surging. Prices of raw materials during July, such as power and fuels, rose 6.7 percent on-year, following a similar increase in June.

Earlier this month, China's central bank warned of the overheating of the economy as robust growth fuels an even stronger investment climate.