Concerns Over China-Originated Inflation Shock Ease... January PPI Up 9.1% (Comprehensive)

Consumer Price Index Rises 0.9%, Growth Slows
Pork Prices Plunge 41.6%... Vegetable Prices Also Fall 4.1%

[Asia Economy Reporter Kim Hyunjung] Due to the decline in raw material prices, China's producer price inflation has slowed for three consecutive months. Concerns over an inflation shock originating from China, following the US, are expected to ease somewhat.

According to the National Bureau of Statistics of China on the 16th, the Producer Price Index (PPI) for January this year rose 9.1% year-on-year, marking a slowdown in the upward trend for three consecutive months. This figure not only falls short of experts' forecast (9.5%) but also marks a return to single-digit growth for the first time in five months.

China's monthly PPI growth rate surged to 13.5% in October last year due to the sharp rise in global raw material prices, reaching the highest level in 25 years since 1996. Subsequently, it narrowed to 12.9% in November and 10.3% in December. This is interpreted as a result of the decline in global raw material prices, which had been a factor driving inflation.

However, it is too early to be complacent. Depending on the developments in the Ukraine situation, international oil prices could soar again, reigniting inflationary pressures from China. As tensions related to the situation escalated, the March delivery West Texas Intermediate (WTI) crude oil traded at the New York Mercantile Exchange reached as high as $95.82 per barrel on the 14th, marking the highest level since 2014. If producer prices in China, the "world's factory," rise sharply, the prices of finished products produced using Chinese labor or materials will inevitably increase as well.

On the same day, China's Consumer Price Index (CPI) for January rose 0.9% year-on-year. This figure fell short of Bloomberg's forecast (1.0%) and marked a slowdown for two consecutive months. Despite seasonal factors such as increased demand during the Lunar New Year holiday, consumer prices showed a moderate trend. Food prices fell 3.8% in January, narrowing the increase, with pork and fresh vegetable prices dropping 41.6% and 4.1%, respectively. The core inflation rate, excluding the volatile energy and food prices, remained at 1.2%, the same as in November and December, indicating a calming of upward pressure due to supply and demand.

The slowdown in both producer and consumer price inflation also indicates an economic slowdown within China. Earlier, the International Monetary Fund (IMF) revised down China's economic growth forecast for next year from 5.6% to 4.8% by 0.8 percentage points in its World Economic Outlook released last month. This adjustment exceeds the global average revision (-0.5%). Additionally, the IMF lowered China's growth forecast for 2023 from 5.3% to 5.2%.

This content was produced with the assistance of AI translation services.