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China Inflation January 2023

China: Consumer inflation increases in January; producer prices decline

Consumer inflation came in at 2.1% in January, which was up from December’s 1.8%. January’s figure marked the highest inflation rate since October 2022, and was driven by higher food prices. Consumer prices rose 0.80% in January over the previous month, after the flat result recorded in December. January’s figure marked the highest reading since January 2021.

The uptick in consumer price pressures in January was likely influenced by the reopening of the economy and the ensuing boost to demand. The timing of the Lunar New Year holiday—which fell in January this year compared to February last year—likely also played a role, as the holiday leads to stronger household spending. Meanwhile, producer prices fell 0.8% on an annual basis in January, which was a larger drop than December’s 0.7% decrease.

Giving their take on the outlook, analysts at Goldman Sachs said:

“Headline CPI inflation (on a year-over-year basis) is likely to pick up in the coming months on an economic rebound after the ‘exit wave’. However, the pace of reflation could be mild due to the significant slack currently in the economy, and we don’t expect headline CPI inflation to exceed the government target of 3% on an annual average basis. PPI deflation may continue due to lower commodity prices.”

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