China's Prices Remain Stable Despite Reopening... February CPI Up 1%

Despite the reopening, there appears to be little change in China's consumer prices.

On the 9th, the National Bureau of Statistics of China announced that the Consumer Price Index (CPI) for February rose by 1.0% year-on-year. This is the lowest increase in over a year since February last year (0.9%).

Compared to the previous month, it fell by 0.5%, also falling short of the global market forecast (1.9%). By category, prices rose for food (2.6%), non-food (0.6%), consumer goods (1.2%), and services (0.6%), but this is interpreted as a result of somewhat slowed consumption following the Chinese New Year (Chunje, 春節) in January. Prices of pork and fresh vegetables dropped by 11.4% and 4.4% respectively compared to a month earlier, and with the end of Chunje reducing travel demand, airfare (12.0%) and travel (6.5%) fees also declined.

The Producer Price Index (PPI), which is surveyed and announced mainly based on wholesale prices of industrial goods, fell by 1.4% year-on-year. This is below the market expectation (-1.3%) and shows a larger decline than the previous month (-0.8%). China's PPI growth rate peaked at 13.5% in October 2021, the highest in 26 years, and has since been decreasing. After recording -1.3% in October last year, it has been negative for five consecutive months. This reflects the sluggish export situation of China due to the global economic downturn, signaling an increase in manufacturing supply and inventory.

The National Bureau of Statistics cited factors for the PPI decline including demand contraction due to the ongoing global economic recession, excess inventory in manufacturing, and falling prices of raw materials including crude oil.

This year, China has set an average CPI growth target of "around 3%." Zhang Ziwei, Chief Economist at Pinpoint Asset Management, explained, "China's weak inflation gives it room to implement more monetary policies."