China’s inflation slows, leaving room for policy easing

REUTERS: China’s factory-gate inflation eased to its slowest pace in six months and consumer price growth also softened in January amid weakening property sector demand, new coronavirus curbs and government efforts to rein in surging materials costs.
The producer price index (PPI) increased 9.1 percent from a year ago, the National Bureau of Statistics (NBS) said in a statement yesterday,

slower than the 9.5 percent growth tipped by a Reuters poll and a 10.3 percent gain in December. It was the weakest pace since July.
While producer prices in the world’s second-largest economy remain elevated thanks to critical supply issues and home and abroad, China’s relatively benign consumer inflation contrasts with cost pressures seen in most other economies.
Analysts believe cooling inflation could provide room for the People’s Bank of China (PBOC) to ease policy to support the slowing economy, even as major central banks elsewhere tighten policy.
“Inflation concerns are unlikely to hold back the (People’s Bank of China) from more policy loosening measures,” said Sheana Yue, China Economist at Capital Economics.
China’s consumer price index (CPI) inched up 0.9 percent last month from a year earlier. Economists in a Reuters poll had expected a one percent rise following a 1.5 percent uptick in December.
“Lower inflation reflects the weak domestic demand,” said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management. “Macro policies have turned more supportive but it takes time for the impact to be transmitted to the economy.”