Sharply rising food prices in China pushed up inflation to a one-year high in the world’s second largest economy.
The consumer price index (CPI) unexpectedly rose to 2% in August from a year ago, mainly on higher food prices and not due to a pick up in economic activity.
On the back of that, the producer price index (PPI) fell 5.9% – marking its 42nd consecutive month of declines.
Deflation fears in China are growing as manufacturers continue to cut prices.
The decline in the PPI was the biggest drop since the global financial crisis in 2009 due to falling commodity prices and slumping demand.
Economists said the continuing fall in producer prices poses the risk of trickling through to consumer prices.
“The change in PPI is very worrying. It could affect corporate profitability, which in turn could affect consumption and the economy,” said Li Huiyong, economist at Shenyin & Wanguo Securities.