China’s annual inflation surged to 4.5 percent last month, the highest level in three months, data showed yesterday, after consumers splashed out on food and gifts over the Lunar New Year holiday.
The consumer price index, a key gauge of inflation, was higher than the 4.1 percent recorded in December and ended five straight months of easing price pressures caused by government restrictions on lending and property purchases.
Analysts said the holiday was unusually early this year and had distorted the monthly data. Retail spending typically soars during the weeklong festival, the most important celebration in the Chinese calendar, as consumers ramp up spending on food, wine and gifts for family and friends.
Photo: AFP
Before last month, inflation had eased for five months in a row after hitting a more than three-year high of 6.5 percent in July, and analysts said the downward trend would likely resume this month as the economy continued to slow.
“It was inevitable that we would see some impact of the Lunar New Year holidays, which were in January this year but February last year, but it seems that this impact was bigger than expected,” said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.
Analysts had expected inflation to rise 4.1 percent, according to a Dow Jones Newswires survey.
The rebound in inflation was driven by food prices, which soared 10.5 percent year-on-year last month compared with 9.1 percent in December, China’s National Bureau of Statistics said in a statement.
The producer price index, which measures the cost of goods at the farm and factory gate, rose an anemic 0.7 percent last month compared with 1.7 percent in December, the statement said, indicating consumer price pressures would ease in the coming months.
Bank of America-Merrill Lynch economist Lu Ting (陸挺) said the data was “significantly distorted” by the holiday “so investors definitely should not read too much into the inflation” figure.
UBS economist Wang Tao (王濤) agreed, saying: “The downward trend of CPI inflation has not been altered.”
In related news, South Korea’s central bank yesterday froze its key interest rate for the eighth straight month, amid competing pressures from a cooling economy and consumer fears of rising prices.
The Bank of Korea held the benchmark seven-day repo rate at 3.25 percent for this month, as widely expected.
Analysts said strong inflationary pressure, coupled with low growth prospects for the domestic economy, left little room for change.
Inflation slowed to 3.4 percent last month year-on-year compared with 4.2 percent in December.
However, in a report released on Monday, the central bank said the outlook for inflation was unstable due to risks from US-Iran tensions and consumer worries over rising costs — based on monthly surveys conducted by the central bank.
Moody’s Analytics said risks to growth and inflation “are evenly balanced,” as industrial production growth eased to 2.8 percent year-on-year in December and was likely to stay weak through the first half of this year.
“The case for a rate cut is growing and it will now only be a matter of time before the Bank of Korea loosens policy,” Moody’s said in a commentary, predicting two small rate cuts in the second quarter.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
RESHAPING COMMERCE: Major industrialized economies accepted 15 percent duties on their products, while charges on items from Mexico, Canada and China are even bigger US President Donald Trump has unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his turbulent effort to reshape international commerce. The baseline rates for many trading partners remain unchanged at 10 percent from the duties Trump imposed in April, easing the worst fears of investors after the president had previously said they could double. Yet his move to raise tariffs on some Canadian goods to 35 percent threatens to inject fresh tensions into an already strained relationship, while nations such as Switzerland and New Zealand also saw increased
RSS