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China’s December Consumer and Factory-gate Inflation Ease

Published 12/01/2022, 04:52
Updated 12/01/2022, 04:52
© Reuters.

© Reuters.

By Gina Lee

Investing.com – China’s consumer and factory-gate inflation grew slower in December as the government intervened to retain materials prices.

Data released earlier in the day showed that the consumer price index (CPI) grew 1.5% year-on-year, down, lower than the 1.8% growth predicted in forecasts prepared by Investing.com and November’s 2.3% growth. It contracted 0.3% year-on-year in 2021, down from the 0.2% growth in forecasts prepared by Investing.com and the previous month’s 0.4% growth.

The data also showed that the producer price index (PPI) grew 10.3%, lower than the growth of 11.1% in forecasts prepared by Investing.com and November’s 12.9% growth.

Slower growth in both indexes indicated easing inflationary pressure as the government stepped in to curb soaring high raw material prices and tackle power shortages.

However, the world’s second-largest economy still faces challenges in 2022 such as property woes, slowing manufacturing, and COVID-19 outbreaks. For some investors, softer inflation could lead to further monetary easing.

“The probability of a rate cut in the first quarter is high, and the closest window is this month,” China Renaissance Securities Hong Kong Ltd. head of macro and strategy research Bruce Pang told Bloomberg.

Consumer inflation “will not be a concern in 2022” and the core measure without counting volatile food and energy costs, will stay below 1.5%, he added.

Meanwhile, measures to tackle COVID-19 outbreaks are expected to weigh on the economic outlook. Several places are reporting an increasing number of COVID-19, including the city Shenzhen as well as Henan and Shanxi provinces. The city of Tianjin, where cases involving the omicron COVID-19 variant, is advising citizens to stay put for Chinese New Year, a peak travel period.

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