Factory prices in China rose for the first time in a year last month as the country’s vast industrial sector leads a recovery from the COVID-19 pandemic, with market analysts hailing the data as a turning point for the world’s second-largest economy.
However, the lingering effects of the pandemic weighed on the country’s vast army of shoppers as consumer prices slipped, hit by new outbreaks that led to the reimposition of containment measures.
Official data showed the producer price index (PPI), a key measure of input costs, at 0.3 percent, having fallen every month last year but in January, owing to a collapse in demand as the virus broke out in the country and then the world.
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The figure was in line with forecasts and a big improvement in the 0.4 percent fall in December last year.
“We believe that the turn of PPI is very solid, from a deflation trend to an inflation trend,” ING Bank NV chief economist for Greater China Iris Pang (彭藹嬈) said. “Although this is mild, it is a turn, a very important turn, and it will last for the rest of 2021.”
The reading comes as China leads a recovery in the world economy, with the quick rollout of COVID-19 vaccines and slowing infection rates fueling hopes that lockdowns and other pandemic containment measures can be eased, setting up a huge bounce this year.
However, the consumer price index edged down a worse-than-expected 0.3 percent, as a spike in cases that led to new tough restrictions in the north of the country combined with a high base from January last year.
“With the Lunar New Year festival 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 in January,” said Dong Lijuan (董莉娟), an official at the Chinese National Bureau of Statistics.
Dong added that air ticket prices fell by one-third, while travel agency fees dropped nearly 10 percent.
This year, the authorities have been encouraging residents to stay at home instead of traveling for the holiday owing to the virus, but the CPI is still tipped to recover.
“Consumer price inflation is likely to spike in February as the New Year effect reverses,” analysts at Capital Economics Ltd said, adding that the slip last month was “no cause for concern.”
However, pork prices continued a downward trend after costs of the staple meat soared last year as an African swine fever outbreak led to the culling of more than 1 million pigs.
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