Home / News / World /  China factory inflation eases as consumer prices jump on holiday

Beijing: China’s factory inflation slowed for the fourth month while consumer prices jumped as millions travelled home to feast with family and friends for the Chinese New Year holiday.

Continued moderation in factory inflation from the world’s largest exporter may signal the waning of a global reflation trend at a time when the US Federal Reserve is proceeding with monetary policy normalization. At the same time, domestic consumer prices are forecast to rise this year on resilient demand and recovering food prices, while remaining within the government’s 3% ceiling.

The moderation is in line with a Bloomberg Economics tracker, which uses daily movements of commodity prices to predict the monthly PPI reading.

“There’s a lot of inflation pressure coming through" for consumers, Helen Qiao, chief Greater China economist at Bank of America Corp. in Hong Kong, said in a Bloomberg Television interview. “It’s getting closer to 3%, which is their comfort level, so I’d say in particular they’d watch out for inflation pressure in food prices."

“We can’t ignore the much higher consumer inflation pressure this year, and that’s what the central bank is looking at," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. “Monetary policy is already tightening."

“When we look at the underlying data, the jump in CPI seems more driven by seasonal fluctuations," said Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen. “PPI is continuing its steady decline and is expected to continue lower in the months ahead due to declining commodity input prices and the base effect."

“Strong demand during Chinese New Year and also the extreme low base last year are the two biggest factors that pushed up the CPI," said Liu Xuezhi, an analyst at Bank of Communications Co. in Shanghai. “As those two factors are temporary, the CPI may head down in coming months, and the overall inflation pressure is still acceptable. PPI will likely see moderate growth, but is unlikely to fall into negative territory." Bloomberg

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