2021.02.1005:32:00UTC+00China's Inflation Turns Negative; PPI Rises For First Time In A Year

China's consumer price inflation returned to negative territory at the start of the year due to seasonal factors, while producer prices climbed for the first time in a year on higher raw material cost, data from the National Bureau of Statistics showed on Wednesday.

Consumer prices fell 0.3 percent on a yearly basis in January, reversing a 0.2 percent rise in December. Economists had forecast prices to drop 0.1 percent.

Month-on-month, consumer prices advanced 1 percent, in line with expectations, but faster than the 0.7 percent growth posted in December.

Excluding food and energy, core consumer prices slid 0.3 percent annually versus a 0.4 percent rise in December.

Despite a 3.9 percent fall in pork prices, food inflation advanced to 1.6 percent from 1.2 percent. Non-food prices dropped 0.8 percent.

Another report from NBS showed that producer prices climbed 0.3 percent annually, in contrast to a 0.4 percent drop in the previous month. This was the first increase since January 2020. Prices were expected to climb 0.4 percent.

Consumer prices declined in January was largely due to a shift in the timing of the Lunar New Year, Sheana Yue and Mark Williams, economists at Capital Economics, said. Consumer price inflation is likely to spike in February as the New Year effect reverses.

The economists forecast inflation to rise to around 2 percent by the end of the second quarter. That should not alarm the central bank but will provide reassurance that they are right to focus on controlling credit risks, they added. As such, the People's Bank of China will tighten policy this year.

Elsewhere, the Ministry of Commerce reportedly said that foreign direct investment into China increased 6.2 percent from last year to $13.47 billion in January. In local currency terms, FDI climbed 4.6 percent to CNY 91.61 billion.