SHANGHAI (AFP) – Inflation picked up in China last month, official figures showed yesterday, as the Lunar New Year holiday boosted January spending.
The consumer price index (CPI), a key measure of inflation, rose 0.5 per cent last month, up from a 0.1 per cent rise in November, according to the National Bureau of Statistics (NBS).
The reading from January, which coincided with the start of the long Lunar New Year holiday this year, is the highest since August’s reading of 0.6 per cent.
Last month’s reading exceeded the 0.4 per cent rise predicted by Bloomberg analysts.
The NBS reported a rise in prices for goods associated with the holiday, where millions of people travel to their hometowns and celebrate with feasts and drinking. Fresh vegetable prices rose by 2.4 per cent year-on-year and the price of meat rose by 13.8 per cent.
The boost in prices last month is “mainly due to higher food prices and tourism-related services prices on an earlier-than-usual Lunar New Year holiday”, Goldman Sachs analyst Xinquan Chen wrote in a note yesterday.
“But the boost is likely to become a drag in February as seasonal demand fades,” Chen said.
China suffered its sharpest fall in prices for 14 years in January 2024, at the end of a four-month period of deflation.
Inflation stayed below 0.5 per cent for nine months of 2024.
While deflation suggests the cost of goods is falling, it poses a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.
A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks – dampening profitability even as costs remain the same.
Beijing unveiled a slew of measures to boost the economy last year, including cutting interest rates and cancelling restrictions on homebuying.
Last month, policymakers expanded a subsidy scheme for common household items, from water purifiers to laptops and electric vehicles.
