China consumer prices fall in January on drop in services costs

BEIJING – China’s consumer prices fell in January after a brief improvement at the end of last year, as the world’s second-biggest economy was hit by the impact of fresh coronavirus outbreaks and decreased travel, official data showed today.

The consumer price index (CPI), a key gauge of retail inflation, fell 0.3% from a year ago, with the National Bureau of Statistics saying that residents travelled less given a series of lockdowns in northern China and more restrictions.

Consumers also did not spend as much on services compared with last year – when the impact of Covid-19 had not yet been felt.

“With the Spring Festival (Lunar New Year) taking place in February this year, and the impact of a partial epidemic spread, there were decreases in both residents’ travel and some contact-based services,” said NBS senior statistician Dong Lijuan.

Dong added that air ticket prices fell 33.2% on-year, while travel agency fees dropped 9.9%.

The overall CPI drop was below analysts’ expectations of prices being unchanged, according to a Bloomberg poll, and down from December’s 0.2% on-year rise.

But NBS figures show that food prices rose on-month due to approaching festivities, local Covid-19 outbreaks and low temperatures that hit production and transportation.

“Consumer price inflation is likely to spike in February as the New Year effect reverses,” said analysts at Capital Economics, adding the slip into deflation is “no cause for concern”.

Pork prices, however, were lower than last year, continuing a downward trend after costs of the staple meat in China rocketed due to an African swine fever outbreak.

There was also further improvement in factory-gate prices, NBS data showed, with the producer price index (PPI) increasing on-year for the first time since January 2020, in line with analysts’ expectations.

Official data showed PPI, a key measure of input costs, came in at 0.3% in January, having fallen every month but January in 2020 owing to a collapse in demand as the virus broke out around the country and then the world. 

The figure was in line with forecasts and a big improvement in the 0.4% fall seen in December.

Dong noted domestic demand continued to improve, and so did the prices of commodities such as crude oil and iron ore, driving a monthly increase. – AFP, February 10, 2021