A vendor waits for customers at his shop in a market in Beijing, February 18, 2016.

Reuters

China’s consumer inflation edged up last month, fueled by rising food prices ahead of the Lunar New Year, while prices at the factory gate remained in deflationary territory where they’ve been for nearly four years. Economists say the uptick for CPI might be short-lived given that price pressures remain weak and deflation is still a risk for the world’s second-largest economy.

China’s consumer-price index rose 1.8% in January from a year earlier, the government’s statistics bureau reported Thursday. The rate is higher than December’s 1.6% rise. The producer-price index declined 5.3% in January from a year earlier, slightly better than expected. This compared with a 5.9% year-over-year drop in December.

Following are excerpts from economists’ views on Thursday’s inflation data, edited for style and length:

China’s consumer inflation is set to edge higher this year, as a sharp fall in the number of female pigs over the past year means pork prices, a big driver of food inflation, is likely to remain elevated even as an acceleration in monetary growth will stoke broader price pressures. The pick-up in consumer inflation in January was mostly seasonal as food prices jumped. In addition, with the sharp falls in the price of oil and other commodities a year ago now starting to drop out of year-on-year comparisons, both CPI and PPI will almost certainly rise further over the coming months. –Julian Evans-Pritchard, Capital Economics

The pick-up in China’s consumer inflation in January is unlikely to continue throughout the year as the acceleration is linked to China’s Spring Festival and won’t stop Beijing from loosening its monetary policy. Growth in China’s consumer price index will likely fall to around 1.2% in 2016 as inflationary pressures are tamed with the fading out of the festival factor. A smaller drop in the January producer price index was due to a low-base comparison with the previous year when oil and other commodity prices dropped sharply. The PPI, which has been falling for nearly four years, will show some further improvement, but is still unlikely to turn positive this year. The annual PPI is likely to drop 4% from a year earlier. –Yan Ling, China Merchants Securities

China’s higher food prices in January is only temporary and the country will likely continue to face deflationary pressure this year. Both vegetable and pork prices reported double-digit year-on-year growth in January ahead of the Lunar New Year, and seasonal effects contributed 0.37 percentage points to headline inflation. But inflation should start retreating in March, giving room to China to conduct further monetary policy easing. The central bank is likely to lower the banks’ reserve ratios by 50 basis points in the first quarter. –Li-Gang Liu and Louis Lam, ANZ Research

 

–Compiled by Pei Li

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