• Consumer Prices Rose 1.0% MoM and 0.7% YoY
   
• Core Inflation Increased to 1.0% YoY
   
• Factory gate deflation deepens

• Deflationary pressures remained considerable

China's consumer prices rose for the first time in six months due to spending linked to the Lunar New Year, while factory-gate prices fell again.

China’s consumer prices rise for first time since August

China’s Consumer Price Index (CPI) rose in February for the first time since August, bucking a months-long stretch of deflation that compounded the country's myriad economic woes. The CPI rose 0.7% YoY, breaking a four-month streak of declines. That followed a 0.8% drop in January. On month-on-month basis, the CPI climbed 1.0%, outpacing the 0.3% uptick in January. Slower food-price deflation was the main factor behind the CPI’s rise. The drop in food prices narrowed to -0.9% YoY from -5.9% in January. Demand related to the Chinese New Year holiday likely gave a boost. Higher travel prices, likely buoyed by holiday demand, were another key reason. These prices surged 23.1% YoY, accelerating from a 1.8% rise in January.

Meanwhile, core CPI, which excludes volatile energy and food prices, grew by 1.2% YoY per cent year on year last month. On a monthly basis, this translated into a 0.5% growth in February from January.

Consumer prices traditionally see a boost during the Chinese New Year period, which fell in February this year. The National Bureau of Statistics (NBS) said rising demand during Lunar New Year was the reason for the uptick in the CPI in February. According to the NBS, during the Chinese New Year period, consumer demand for food products grew, in addition to rainy and snowy weather in some regions affecting supply. The boost to food prices from the Chinese New Year was clear, with that gauge rising 3.3% MoM in February, much more than a 0.4% rise in January. The picture for travel prices was similar, with that component jumping 13.1% MoM after a 4.2% rise in January.

Source: BIMB Securities Research - 11 Mar 2024