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China Inflation December 2020

China: Consumer price inflation returns in December

Consumer prices increased 0.70% from the previous month in December, swinging from the 0.60% fall logged in November. December’s reading was the sharpest increase in prices since February.

Inflation came in at 0.2% in December, contrasting November’s 0.5% drop in prices—which had marked the first annual decline in prices since 2009. Meanwhile, the trend pointed down, with annual average inflation coming in at 2.5% in December (November: 2.9%). Lastly, producer prices fell 0.4% on an annual basis in December, which was a smaller drop than November’s 1.5% decrease. The softer decline was likely in part due to power disruptions and greater raw material price pressures.

Over 2020 as a whole, consumer price inflation was moderate at 2.5%, while producer prices declined for the second straight year.

Panelists see price pressures rising in 2021 thanks to firming energy prices and stronger domestic demand, although improved food supply—particularly of pork, as farmers rebuild their hog herds in the wake of African swine fever—will keep a lid on the increase.

Regarding the outlook for prices, analysts at United Overseas Bank commented:

“We see possibility for the CPI to dip into the negative again in January and February due to the high base of comparison before rebounding strongly in the second half of the year to bring the annual CPI to 2.5-3.0% this year. The strength of the recovery is dependent on the energy price trajectory, the recovery in both global demand and the domestic services sector.”

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