Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

China’s Steadying Inflation Leaves Door Open for Monetary Easing

Published 09/01/2020, 03:39 pm
Updated 09/01/2020, 03:45 pm
China’s Steadying Inflation Leaves Door Open for Monetary Easing

China’s Steadying Inflation Leaves Door Open for Monetary Easing

(Bloomberg) -- China’s consumer inflation steadied in December while factory price declines moderated, leaving room for monetary easing to cement a recent stabilization in economic growth.

The consumer price index rose 4.5% last month from a year earlier, matching November’s rate and halting the recent acceleration fueled by surging pork prices. The producer price index declined 0.5% from a year earlier versus a 1.4% drop in November.

While pork prices -- a key element in the country’s CPI basket -- rose 97% from a year ago, that was actually slower than increases seen in October and November. They fell 5.6% in December from November.

Rising food demand during the Lunar New Year holidays is set to fuel price increases in January, but beyond that price pressures may moderate. That gives the central bank room for additional stimulus if needed after it started the year by trimming the amount of cash that lenders must hold in reserve and signaled continued action in 2020 to reduce borrowing costs for companies.

“The PBOC is likely to continue to use interest rate and liquidity tools to loosen monetary conditions in 2020, though the easing will probably be less pronounced than last year,” David Qu, a China economist at Bloomberg Economics in Hong Kong, wrote in a note. “We expect the PBOC to stick to a stance of measured easing to counter the economic slowdown.”

For the year, consumer inflation for 2019 stood at 2.9%, in line with the government-set target of 3%, while producer prices declined 0.3%. Core inflation, which removes the more volatile food and energy prices, stabilized at 1.4% in December, signaling ongoing weakness in the broader economy.

China’s economy has shown signs of recovery in recent months as global demand steadies and trade tensions ease. As commodity prices rise and factories start restocking, PPI deflation is set to continue to moderate and some see it turning positive as soon as January.

But measuring the economy’s momentum will be especially tricky in coming months. The week-long lunar new year holiday starts from Jan. 24, earlier than most years in the past century, creating a “noticeable distortion” to monthly economic indicators, according to economists at China International Capital Corp. including Eva Yi.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.