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Chinese consumer prices bounced back in February, rising at their fastest pace in more than three years due to lunar new year celebrations and surging oil prices, while deep deflationary pressures in industry showed signs of easing.
A rise in oil prices due to “geopolitical” factors and intense spending on AI-related electronics and other industries also helped boost prices, China’s National Bureau of Statistics said on Monday.
The consumer price index rose 1.3 per cent year on year in February, up from 0.2 per cent a month earlier and slightly stronger than analyst expectations of 0.8 per cent in a Reuters poll. This is the biggest rise since January 2023.
The producer prices index, meanwhile, was also stronger than expected, declining 0.9 per cent compared with a fall of 1.4 per cent a month earlier and analysts’ expectations of a drop of 1.2 per cent.
China has been struggling with deflationary pressures for more than three years amid soft domestic demand after the coronavirus pandemic and a deep slump in the property market. Authorities have prioritised investment in industry, leading to overcapacity — or what Beijing calls “involution” — in several sectors and depressing prices further.
The NBS said the stronger CPI figure “was mainly due to the concentrated release of consumer demand during the extended Spring Festival holiday, resulting in a significant increase in service prices, exceeding seasonal norms”. Service prices rose 1.1 per cent, but some analysts said the figure was flattered by a softer reading last year.
The NBS said “rising international commodity prices” and macroeconomic policies, such as efforts by Beijing to reduce what it calls excessive competition between industries, had helped support the PPI index.
While the NBS did not directly mention the Iran war, which started at the end of February, it said that “rising international prices for non-ferrous metals and crude oil drove up prices in related domestic industries” during the month.
“The impact of international geopolitical conflicts on energy prices was evident, with domestic gasoline prices rising 3.1 per cent,” said Dong Lijuan, a chief statistician at the NBS.
Rapid growth of “AI+” sectors “has driven up prices for electronic components and electronic materials”, the NBS said, adding: “The accelerated construction of a modern industrial system has led to year-on-year price increases in related industries.”
It said prices of solar equipment and components — a sector suffering from intense competition — rose 3.2 per cent while lithium-ion battery manufacturing prices reversed a 1.1 per cent decline the previous month to rise 0.2 per cent, “marking the first increase after 33 consecutive months of year-on-year declines”.
