China's producer inflation continued to slow as raw material and energy prices declined in December. China's CPI also slumped due to falling food prices.
On Wednesday (12/January), China's National Bureau of Statistics released data on producer inflation (PPI) which increased 10.3 percent year-on-year (Year-over-Year) in December. Although still high, China's PPI figure last month was lower than the 12.9 percent increase in the previous period.
"Government policies to secure supply and stabilize prices continued throughout December, and declining energy prices were the main catalyst behind the decline in producer inflation," Dong Lijuan, senior statistician at NBS said in a note.
Separately, Sheana Yue at Capital Economics said that China's producer inflation is expected to continue to soften in the months ahead; this would confirm their initial view of the temporary spike in Chinese producer inflation in recent months.
"There was an immediate drop in prices for most upstream industrial goods such as coal and metals, thanks to falling global commodity prices and weaker downstream demand. Output prices of electronics and consumer goods continued to fall last month, possibly reflecting increased supply of semiconductors," said Yue.
China's CPI sluggish
Released alongside the PPI, China's annual consumer inflation (CPI) data fell from 2.3 percent to 1.5 percent in December. The figure was below economists' expectations for a 1.8 percent increase, and marked the first decline in three months.
This significant decrease in CPI was caused by the decline in food prices by 1.2 percent from the previous year. In fact, the price of pork, which is one of China's staple foods, has fallen by 36.7 percent.
"The main driver that caused China's consumer inflation to fall again was the supply of pork and vegetables, which recovered from distribution disruptions due to bad weather in October and November," Yue said.
Dong Lijuan also added, "Covid cases increased again in several cities in December, but local governments have been quick to take control measures including securing supplies, so that consumer prices are observed to be stable overall."
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