China’s consumer inflation picks up as recovery gathers pace
CHINA’S consumer inflation accelerated last month as the Chinese New Year holiday spurred demand following the nation’s reopening from Covid Zero.
The consumer price index (CPI) rose 2.1 per cent from a year earlier, the National Bureau of Statistics (NBS) said on Friday (Feb 10), matching the median estimate in a Bloomberg survey. That followed a 1.8 per cent year-on-year gain in December. Core inflation, which doesn’t include volatile food and energy prices, rose to 1 per cent — the highest since June.
The producer price index (PPI), meanwhile, fell 0.8 per cent after declining 0.7 per cent the previous month, the National Bureau of Statistics. Economists surveyed by Bloomberg had expected a 0.5 per cent drop.
The data “points to a generally stable inflation outlook”, said Zhou Hao, chief economist for Guotai Junan International Holdings. He said inflation is “well anchored”, and expects monetary policy to “remain supportive and continue to provide ammunition to the economic recovery”.
The central bank has injected some US$150 billion in funds into financial markets over the past three days to ease a liquidity squeeze, a sign that it’s keeping policy relatively loose.
The economy broadly improved in January after the nation removed its Covid Zero restrictions at the end of last year. Consumer prices in particular were expected to pick up given the rebound in demand around Chinese New Year as people travelled and spent money, with holiday spending data pointing to a jump in catering, tourism and other in-person businesses.
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The jump in consumer prices was due to effects from the Spring Festival, along with the changed virus prevention and control policies, said Dong Lijuan, chief statistician at the NBS in a statement.
The growth in food prices widened to 6.2 per cent, driving the overall CPI figure higher by more than a percentage point, Dong said.
Manufacturing activity was muted in the month given that many businesses closed for the holiday and people travelled back to their hometowns to see family. Even so, surveys showed a slight expansion of activity in January for the first time in four months.
Dong also attributed the PPI decline to “factors such as fluctuations in international crude oil prices and the decline in domestic coal prices”.
The growth in consumer prices is likely to accelerate this year, though it’s not yet clear how aggressive inflation will be compared to other countries, which saw prices rise as they emerged from the pandemic.
Economists expect inflation in China to be relatively mild this year at about 2.3 per cent.
The economy’s overall recovery this year — which is largely expected to rely on a boost in consumption — remains precarious. A sluggish property market, declining exports and rising geopolitical tensions are significant overhangs that have clouded the outlook.
Slow income growth and pressure on the jobs market have added other layers of uncertainty to the recovery as economists question whether the trillions yuan in excess savings that people built up during the pandemic will translate into consumption growth. BLOOMBERG
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