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China Inflation February 2021

China: Consumer prices decline in February in annual terms

Consumer prices increased 0.60% in February over the previous month amid higher food prices, but marked a smaller rise than January’s 1.00%.

Consumer prices declined 0.2% year-on-year in February on an unfavorable base effect, a more moderate drop than January’s 0.3% fall. Annual average inflation fell to 1.6% in February (January: 2.0%). Lastly, producer price inflation rose to 1.7% from the previous month’s 0.3%, marking an over two-year high.

Panelists see price pressures rising from their current levels later in 2021 thanks to a more supportive base effect, 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. Moreover, the rise in consumer price inflation is forecast to be lower than the government’s 3.0% target.

Regarding the implications of the recent uptick in producer prices (PPI), Ho Woei Chen, economist at United Overseas Bank, commented:

“As China is a major part of the global supply chain, the strong rebound in PPI may further fuel concerns about the global inflation outlook. Nonetheless, it must be emphasised that China’s PPI is still being led by higher commodity prices while global demand will likely take longer to recover which thus supports the continuation of the current monetary policy stance this year.”

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