Inflation signals demand recovery strongly

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2023-02-12 23:47

Despite facing inflationary pressures amid the robust recovery of domestic demand and high prices of energy and raw materials, they said they believe China will keep prices stable within a reasonable range this year, given its sufficient supply of daily necessities and the government's effective measures to maintain price stability.

Their comments followed data from the National Bureau of Statistics that China's Consumer Price Index, a main gauge of inflation, rose at its fastest pace in three months, climbing 2.1 percent from a year earlier in January, which is higher than the 1.8 percent annual rise seen in December.

Dong Lijuan, an NBS statistician, attributed the acceleration in CPI inflation to factors such as the Chinese New Year holiday effect and the optimization of COVID-19 control measures, while the fall in factory-gate prices was affected by international oil price fluctuations and China's falling coal prices.

NBS data showed the Producer Price Index, which gauges factorygate prices, was down 0.8 percent in January from a year earlier, compared with a 0.7 percent annual contraction seen in December, showing an annual decline for the fourth month in a row.

Lu Ting, chief China economist at Nomura, said the growth in CPI inflation was mainly driven by the Spring Festival holiday falling in January this year compared to February last year, and the decline in the PPI was driven by falling global energy prices.

"Looking forward, we expect CPI inflation to edge down marginally to 2 percent in February," Lu said.

Nomura recently raised its 2023 China GDP growth forecast from 4.8 percent to 5.3 percent and the 2023 CPI inflation forecast from 2.5 percent to 2.6 percent.

"We still believe inflation is not a major concern in China this year, and we expect (the monetary) policy to remain accommodative in 2023," Lu said.

This year, China will seek to keep overall prices stable within a reasonable range, given the sufficient supplies of grain and oil, expanding acreage of vegetable farms, effective measures to use pork reserves to steady prices and the solid foundation for ensuring stable prices of essential commodities, said Zhang Xuewu, chief of the price analysis and forecasting division at the Price Monitoring Center, which is part of the National Development and Reform Commission, the country's top economic regulator.

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