BEIJING (AFP) – China’s consumer inflation rose modestly in December, official figures released yesterday showed, though it remained below two per cent in a sign the economy is still struggling with the effects of years of zero-COVID.
The consumer price index – the main gauge of inflation – hit 1.8 per cent on-year, up from 1.6 per cent in November, the National Bureau of Statistics (NBS) said.
Inflation for the whole of 2022 rose by an average of two percent, making China an outlier compared with other major economies where prices have soared on the back of a spike in energy and food costs, and supply chain snarls.
Beijing had targetted an average inflation rate of three per cent for 2022, and the lower figure will give authorities room to provide much-needed stimulus to the economy.
But the world’s second largest economy is still reeling from the effects of years of its zero-COVID policy, which hammered businesses and supply chains and dampened consumption, though many restrictions have now been lifted.
The producer price index, which measures the cost of goods leaving factories, contracted in December for the third consecutive month.
The 0.7-per-cent shrinkage is a further sign of weak demand and reduced margins for businesses.
“The economy is still running below potential,” Zhiwei Zhang of Pinpoint Asset Management wrote in a note.
“High-frequency indicators such as traffic flows picked up recently, but demand is still not strong enough to lead to inflationary pressure. Inflation is not a constraint for monetary policy to loosen further this year.”
China has been relatively unaffected by a global surge in food prices since the invasion of Ukraine in February.
But officials are keeping a close eye on meat, widely consumed in China, to avoid popular discontent.
While food prices in general rose a moderate 2.6 per cent on-year in December, meat surged 22 percent.
China began lifting most of its zero-COVID measures at the beginning of last month.