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China's consumer inflation unexpectantly dropped by 0.3 percent year-on-year in January 2021, from 0.2 percent the previous month and compared with market consensus of unchanged. The decline was primarily due to a fall in the cost of transport (-4.6% vs -3.1%) and rent, fuel, and utilities (-0.4% vs -0.6%). However food prices went up 1.6 percent, the most in three months

Chinese Vegetables

Food prices in China continue to be pressured by the high pork prices from two years ago following an outbreak of African swine fever,  though pork prices did fall sharply this month but was negated as other food groups saw sharp rises led by a 10.9% rise in vegetables. Pork is a staple of the Chinese diet. Further to that the coldest winter in history has led to food shortages with transport costs falling largely because of inaccessability.

The consumer price index in China unexpectedly dropped by 0.3 percent year-on-year in January 2021, after a 0.2 percent gain a month earlier and compared with market consensus of an unchanged reading. 

China Inflation Rate

On a monthly basis, consumer prices rose by 1.0 percent in January, shifting from a 0.4 percent fall in December, due to adverse weather and rising demand ahead of the Lunar New Year holiday.

January Breakdown

The decline was mainly due to a fall in cost of non food:

  • Prices falling for transport (-4.6% vs -3.1%)
  • Rent, fuel, and utilities (-0.4% vs -0.6%)
  • Clothing (-0.2% vs -0.1%);
  • Other goods and services (-0.9% vs 2.2%).
  • Prices of household goods and services were flat for the third straight month as was education costs, flat after rising 0.9% in December.
  • Prices of health slowed sharply (0.4% vs 1.3%).

Rising Prices Included:

  • Food prices went up 1.6 percent, the most in three months, following a 1.2 percent gain in December.
  • Second straight month of rise in food prices  amid adverse weather and rising demand ahead of the Lunar New Year festival.
  • Cost increased for eggs (1.2 percent vs -10.8 percent in December), fresh fruit (1.3 percent vs 6.5 percent), fresh vegetables (10.9 percent vs 6.5 percent), cooking oil (6.0 percent vs 4.3 percent), and dairy products (1.7 percent vs 1.3 percent).
  • In contrast, pork prices fell faster (-3.9 percent vs -1.3 percent) after soaring in 2019 due to the African Swine outbreak.

 China Food Inflation

The Inflation Rate in China averaged 5.13 percent from 1986 until 2019, reaching an all time high of 28.40 percent in February of 1989 and a record low of -2.20 percent in April of 1999. source: National Bureau of Statistics of China

Surging consumer inflation is adding to the headaches of policymakers who are racing the calendar to meet Beijing’s annual growth target  as it slows to the lower end of a 6%-6.5% range for 2019.

source: National Bureau of Statistics of China

From The Traders Community News Desk

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