China inflation rebounds to 2.1% but still far from central bank’s target

china economyTC

Bankinter : Inflation rebounded three tenths to +2.1% in January (in line with expectations), but the fall in producer prices gained inertia (-0.8% vs -0.5% expected vs -0.7% previously).


The rebound in inflation is explained by the rise in food prices (+6.2% vs +4.8% previously) and the increase in demand, especially in leisure-related products and services after the lunar year. The decline in producer prices is good news because it comes in an environment marked by the reopening of the economy and the recovery of activity -Caixin Composite PMI at 51.1 in January vs. 48.3 before-.

Inflation remains far from the PBOC/Central Bank of China target (~3%), with Underlying CPI at 1.7% (vs 0.7% bw). The PBOC is one of the few central banks maintaining a loose monetary policy – rate cuts and liquidity injections – to mitigate the impact of the pandemic, the global economy’s loss of traction (exports) and China’s real estate crisis (refinancing to developers).

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