China consumer inflation rises at slowest pace in a year

BEIJING: China’s annual consumer inflation slowed down in February as consumers remained cautious despite the abandonment of strong pandemic controls late last year, official data showed on Thursday.

Producer deflation extended into a fifth month. The consumer price index (CPI) for the month was 1.0% higher than a year earlier, rising at the slowest pace since February 2022 and compared with the 2.1% annual rise seen in January, said the National Bureau of Statistics (NBS). The result fell short of the median estimate of a 1.9% gain in a Reuters poll.

The CPI, which is seasonally adjusted, fell 0.5% from a month earlier, missing the forecast of 0.2% gain. The monthly CPI rise in January was 0.8%.

The government has set a target for average consumer prices in 2023 to be about 3% higher than last year, when prices were up 2% on 2021 and fell short of a target for 3%.

Annual producer deflation deepened last month. The producer price index (PPI) in February fell 1.4% from a year earlier, largely driven by softer commodity costs. That compared with an annual contraction of 0.8% seen in January and the median February expectation for a 1.3% decline in a Reuters poll.

Since October, producer prices have been consistently lower than a year earlier. China’s parliament has set what analysts say is a conservative growth target for 2023 gross domestic product of around 5%, a sign that policymakers are aware of economic headwinds.

The economy, the world’s second biggest, has seen a tentative recovery from COVID-19 disruption while facing weaker demand abroad and a domestic property downturn. Economists say China will nonetheless see upward pressure on consumer prices in coming months, mostly thanks to the end of efforts to suppress COVID-19.

Core annual inflation, which excludes volatile food and energy prices, was 0.6% in February, compared with January’s 1.0%, reflecting persistently weak domestic demand.

The economy gave one of its weakest performances in decades last year, squeezed by three years of pandemic controls, the property downturn and a crackdown on private enterprise. To bolster growth, the government plans to stick with its usual playbook of spending on infrastructure.