China’s inflation rises 2.1% due to Lunar New Year, end of ‘zero Covid’
Shanghai, China, Feb 10 (EFE).- China’s consumer price index (CPI), the main indicator of inflation, rose 2.1 percent year-on-year in January due to the Lunar New Year holiday and the end of the country’s strict ‘zero Covid’ policy, both of which boosted consumption.
Meanwhile, the producer price index (PPI), which measures wholesale inflation, fell by 0.8 percent, according to official data published by the National Bureau of Statistics (NBS) on Friday.
The CPI had risen 1.8 percent in December and 2 percent overall in 2022, while the PPI decreased 0.7 percent year-on-year in the last month of last year, thereby moderating the pace of increase throughout the year to 4.1 percent.
The evolution of both indicators in January was slightly below analysts’ expectations, who forecast an expansion of 2.2 percent for the CPI and a contraction of 0.5 percent for the PPI.
In the month-on-month comparison, the CPI increased by 0.8 percent and the PPI decreased by 0.4 percent.
NBS statistician Dong Lijuan said that, apart from the rise in food prices, the end of the “zero Covid” policy, coinciding with the country’s biggest annual holiday, also led to an around 20 percent increase over December in air tickets due to the increase in demand.
Movie and show tickets as well as tourist tours also recorded increases.
“We expect China’s reopening to push up inflation further in the coming months, but we doubt it will rise as high as in many other economies after they reopened. In contrast to developed economies, households in China received fewer fiscal transfers during the pandemic and suffered from negative, rather than positive, wealth effects,” Julian Evans-Pritchard and Zichun Huang, analysts at UK-based research firm Capital Economics, said.
“The PBOC (China’s central bank) therefore still has some scope to ease policy to support the recovery. We anticipate further cuts to policy rates before long, the first of which might come as soon as next Wednesday,” they added.
The NBS attributed the decline in industrial prices to “fluctuations” in international crude oil prices and a decline in coal prices, although it should be remembered that the PPI has been declining for months due to the comparative base effect after the high inflation rates it experienced at the end of 2021 and the beginning of 2022. EFE