economic indicators

Chinese Factory Prices Soar in February, but Challenges Remain on Road to Recovery

Economic Indicators (Mar 09, 2021 10:51PM ET) Chinese Factory Prices Soar in February, but Challenges Remain on Road to Recovery

© Reuters.

By Gina Lee – China’s factory gate prices climbed at their fastest pace since November 2018 in February, with the scramble to fill export orders raising expectations for strong Chinese growth in 2021.

National Bureau of Statistics data released earlier in the day showed that the Consumer Price Index (CPI) grew 0.6% month-on-month, against the 0.4% growth in forecasts prepared by and January’s 1% growth.

The CPI contracted 0.2% year-on-year, against the forecast 0.4% contraction and January’s 0.3% contraction. The Producer Price Index grew 1.7% year-on-year in February, against the forecast 1.5% growth and January’s 0.3% growth.

The low base in 2020 was one factor in the better-than-expected data but comes as investor worries about surging inflation globally continue to mount.

Trade data released during the previous week said that exports climbed 60.6% year-on-year in February. Also, during the previous week, the National People’s Congress set a modest economic growth target of above 6% for 2021, against investor expectation for an expansion of more than 8%.

The second-largest economy globally continues to face challenges on the road to recovery, as the COVID-19 situation remains severe globally and continues to erode demand.

“We do not think the recent period of consumer price deflation is likely to persist. Shifting pork price base effects will nudge up food inflation, a tightening labor market will push up core inflation and energy inflation will rebound thanks to rising oil prices,” Capital Economics senior China economist Julian Evans-Pritchard said in a note.

“Given that officials have signaled a hawkish tilt in recent weeks, we think the People’s Bank of China will tighten policy this year,” the note added.Chinese Factory Prices Soar in February, but Challenges Remain on Road to Recovery Add a Comment

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