China’s Consumer Inflation Picks Up on Lunar New Year Buying

According to the National Bureau of Statistics, the CPI came in at 1.8 percent year-on-year in January, compared with 1.6 percent in December.

This was the result of poor weather conditions in January hitting food production and higher demand leading up to the Lunar New Year holiday, which fell in early February this year.

In January, the annual rate of inflation as measured by the Harmonised Index of Consumer Prices went down to 0.8 per cent, the NSO said today.

But the producer price index fell 5.3 percent, compared with a 5.9 percent decrease in December, extending declines to a record 47 months, signaling weak demand from factories.

ANZ economists said that “overall, China will likely face strong deflationary pressure in the remainder of the year”.

“The rise in food prices should be temporary as seasonal factors dissipate”.

Consumer prices have held up better, reflecting the relative strength of the labour market, but analysts have been watching closely to see whether weakness in the industrial sector and anaemic global trade will start to be felt more strongly in wages and income growth this year.

Growth slowed to its lowest rate in a quarter of a century previous year as Beijing strove to effect a hard transition in the country’s economic model away from reliance on exports and fixed-asset investment towards one driven by consumers.

Chinese consumer price inflation (CPI) accelerated sharply January, providing tentative evidence that disinflationary forces may be ebbing for the moment.

China’s consumer prices rose for a third consecutive month in January spurred by rising food prices, signalling easing of deflationary pressure, official data showed on Thursday. “But if the pressure persists, we believe the central bank will choose a certain time to take more easing measures”, Liu said.