P&G, Unilever up China prices due to inflation

By Jason Subler and Melanie Lee, Reuters

SHANGHAI–Consumer goods giants Procter & Gamble and Unilever will both raise their prices on detergent and soap in China by up to 15 percent next month, local media reported, underscoring the challenges Beijing faces to rein in inflation. Policy makers in the world’s second-largest economy have been racing to contain consumer prices, which rose 4.9 percent in February from a year earlier, to prevent inflationary expectations from settling in and contributing to further rises in the prices of everything from broccoli to beer.

Chinese state television on Monday showed images of empty store shelves in some Chinese cities as residents raced to pick up P&G and Unilever products before the price rises went into effect, highlighting the sensitivity to prices of especially poorer Chinese people, who are hit hardest by inflation. Unilever confirmed a report on the price rises by the English-language Shanghai Daily, which had said the rises were on account of rising raw materials costs, but declined to give additional details. P&G could not be reached for comment. The two companies, which sell a variety of products including shampoo, bath lotion and toothpaste, have a significant portion of the consumer goods market in China according to past statements by executives. But economists said they did not think the price rises would have a significant impact on the government’s fight against inflation. “I’m increasingly sure that there has been a lot of monetary policy tightening, and if that’s the case, then inflation will start to come down,” said Paul Cavey, an economist at Macquarie in Hong Kong. China does not publish the makeup of its consumer price basket, but bank economists estimate the “health, medical and personal products” category, within which consumer products fall, has a weighting of about 9.5 percent. China has raised interest rates and banks’ required reserves multiple times in the past several months in an effort to tame inflation, which has stabilized at under 5 percent after hitting a peak of 5.1 percent in November. Although food is the main driver of consumer price pressures, the government wants to prevent inflation expectations from growing. There are some signs its efforts are starting to take effect.