China inflation: cost of food falls, factory-gate prices hit lowest in 6 months
- China’s official consumer price index (CPI) rose by 0.9 per cent in January from a year earlier, down from 1.5 per cent in December
- China’s producer price index (PPI) rose by 9.1 per cent in January, down from a rise of 10.3 per cent in December, and to the lowest level since July
.JPG?itok=J8tgfPmW&v=1659948715)
China’s improving consumer and factory-gate inflation outlook continued last month, data released on Wednesday showed.
This was below the expectations of analysts in a Bloomberg survey, who had predicted a slowdown to 1 per cent growth last month.
Food prices fell by 3.8 per cent from a year earlier, down from a fall of 1.2 per cent in December, driven by a 25.6 per cent fall in the meat price and a 4.1 per cent fall in the price of fresh vegetables.
The price of pork – a staple meat on Chinese plates – plunged by 41.6 per cent compared with a year earlier in January, down from a fall of 32.7 per cent in December. It alone dragged down the consumer price index by 0.96 percentage points.
China’s core consumer inflation rate, excluding volatile food and energy prices, rose by 1.2 per cent in January compared with a year earlier, unchanged from December.
Non-food prices increased by 2 per cent last month, year on year, down from a reading of 2.1 per cent in December.
Senior NBS statistician Dong Lijuan attributed the fall in China’s CPI to government efforts to ensure the supply of key consumer goods ahead of the Lunar New Year.
In comparison, inflation in the United States hit a 40-year high of 7.5 per cent last month.
“About 0.5 percentage points of the January rise was due to carry-over effects,” Dong said. “Consumer prices are overall stable.”
Meanwhile, the official producer price index (PPI), which reflects the prices factories charge wholesalers for products, rose by 9.1 per cent in January from a year earlier, down from a rise of 10.3 per cent growth in December.
Dong attributed the slowdown to cooling prices of both coal and steel that have, due to government efforts, fallen by 3.5 per cent 1.9 per cent, respectively.
Inflation concerns are unlikely to hold back the [People’s Bank of China] from more policy loosening measures. We anticipate further policy rate cuts before the middle of the year.
“Chinese inflation continued to drop back last month. Although there are some signs of supply disruption, we think these will be temporary. Factory-gate inflation should moderate further while consumer price inflation will remain muted this year,” said Sheana Yue, China economist at Capital Economics.
“Factory gate inflation will probably decline further over the coming months. Admittedly, commodity prices have continued rising in recent weeks. But base effects will weigh more heavily on the headline PPI rate going forward. And with property construction slowing, we see downside risks to the price of industrial metals and energy.
“Headline CPI is unlikely to breach 2 per cent for most of this year. Admittedly, fuel prices have risen further in recent weeks. But base effects will continue to weigh on fuel price inflation.
“Meanwhile, pork prices have continued to fall at the start of February, and the economic slowdown is likely to keep core inflation subdued. As such, inflation concerns are unlikely to hold back the [People’s Bank of China] from more policy loosening measures. We anticipate further policy rate cuts before the middle of the year.”
