China: Inflation came in line with expectations in February – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest inflation figures in the Chinese economy.

Key Takeaways

“China’s CPI inflation stayed in line with consensus forecast at 0.9% y/y and was unchanged from Jan (Bloomberg est: 0.9%; Jan: 0.9%) while PPI edged lower to 8.8% y/y in Feb but was above consensus forecast (Bloomberg est: 8.6%; Dec: 9.1%). Inflationary pressure outside of energy has remained fairly muted.”

“However, the surge in commodity prices and potential for wider supply disruptions due to the RussiaUkraine conflicts have now turned the inflation risks to the upside. Weaker domestic and global demand may provide some offset to the higher inflation risks. On balance, the inflation for 2022 could rise closer to the government’s target of 3.0% compared to our forecast of 2.2% (2021: 0.9%). For now, we are maintaining our forecast for PPI to average 4%-6% in 2022 (2021: +8.1%).”

“At this level, the inflation should not be a big concern for the People’s Bank of China (PBOC) yet.”