China’s consumer price index returned to positive territory in December, raising hopes that China’s economic recovery will further boost demand while core inflation remains weak.
The country’s consumer price index rose by 0.2% year-on-year in December after falling 0.5% a month ago, exceeding expectations, mainly driven by food prices.
Although the country has quickly recovered from the coronavirus, China’s price growth has been weak in recent months, and the coronavirus is driven by industrial production, as new cases are still low.
Compared with the expected contraction in other economies, China’s gross domestic product (GDP) is expected to grow by 2.1
The core inflation rate (excluding food and energy prices) fell to 0.4% year-on-year in December, which is lower than the lowest level at any time since the coronavirus outbreak and since the beginning of 2010.
As other economic sectors continue to heat up, persistently low levels of inflation have created problems for policymakers. Last year, the People’s Bank of China lowered the benchmark lending rate, but since then the government has taken action to restrict the real estate industry.
Julian Pritchard-Evans, Senior China Economist at Capital Economics, said: “As economic activity will remain strong and potential inflation may rebound, we believe that the Chinese people The bank will tighten policy this year.
But he added that due to the sharp increase in pork prices last year, consumer prices may return to deflation in the coming months.
The African Swine Fever outbreak in the summer of 2018 caused millions of pigs to be culled, which raised the price of pork-pork is one of the most important components of China’s consumer price index. In July, pork prices rose by 86% year-on-year.
For most of last year, China’s ex-factory prices have been in negative territory, but in December they fell by 0.4% year-on-year, exceeding economists’ expectations. On a monthly basis, the producer price index rose by 1.1%, the fastest rate in more than four years.
Iris Pang, ING’s chief economist for Greater China, said that part of the growth was due to the coronavirus outbreak in Hebei Province, which disrupted supplies. China reported on Monday that new cases have exceeded 100 for the first time since July, and almost all new domestic cases are in Hebei.
But Ms. Peng added that both CPI and PPI will rise in 2021.
She said: “After the Spring Festival, we should see demand pick up.”