China Inflation January 2021


China: Consumer prices decline in January, producer prices return to growth

February 10, 2021

Consumer prices increased 1.00% in January over the previous month, accelerating from the 0.70% increase logged in December. January's reading was the sharpest increase in prices since January 2020.

Consumer prices fell 0.3% on an annual basis in January, contrasting December’s 0.2% rise. Annual average inflation fell to 2.0% in January (December: 2.5%). Lastly, core prices fell 0.3% year-on-year, contrasting December’s 0.4% rise. However, producer prices returned to growth in annual terms in January amid higher commodity prices, increasing 0.3% year-on-year (December: -0.4% year-on-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:

“Food prices will face temporary pressure from supply disruption from Covid-19 containment measures and adverse weather conditions while real demand is likely dampened by the resurgence of coronavirus infections and tightening measures especially going into the Lunar New Year period. A high base effect and relatively subdued demand pressure will continue to keep inflation contained in 1Q21 before a rebound from stronger demand recovery and sustained commodity prices in the later part of the year […]. The strength of the recovery is dependent on the energy price trajectory, the recovery in both global demand and the domestic services sector.”

FocusEconomics panelists forecast that inflation will average 1.7% in 2021, which is down 0.2 percentage points from last month’s estimate, and 2.2% in 2022.


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China Inflation Chart

China Inflation January 2021 1

Note: Annual and monthly variation of consumer price index, and annual variation of producer price index, in %.
Source: National Bureau of Statistics of China (NBS).

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