China Inflation Weakest In A Year; Factory Gate Deflation Deepens

China’s consumer price inflation eased markedly in February on weak demand following the Lunar New Year holidays and producer price deflation deepened further, official data showed on Thursday.

Consumer prices grew 1.0 percent on a yearly basis in February that was weaker than the 2.1 percent gain in January, the National Bureau of Statistics said.

This was the slowest pace since February last year and was below economists’ forecast of 1.9 percent increase.

Core inflation that excludes volatile food and energy prices slowed to 0.6 percent from 1.0 percent in January.

Overall consumer prices decreased 0.5 percent from the previous month. That was in contrast to the expected increase of 0.2 percent. Prices had increased 0.8 percent in January.

The annual slowdown was driven by the fall in consumer demand after the Chinese New Year holidays and sufficient market supply, NBS statistician Dong Lijuan said.

The Chinese government aims to keep consumer price inflation at around 3.0 percent.

Consumer price inflation will rebound in the coming months after the reopening of the economy, Capital Economics economist Julian Evans-Pritchard said. But it is unlikely to reach the levels seen in other economies when they opened up.

While no formal policy tightening is anticipated this year, the National People’s Congress did signal that further broad-based easing is unlikely, the economist observed.

Producer prices declined further in February, down 1.4 percent after a 0.8 percent fall in January, the NBS said in a separate communiqué. Economists had forecast prices to drop 1.3 percent.

The NBS statistician said the annual fall continued due to the high base of comparison.

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