Jan 11, 2021 08:20 PM

Update: China’s Consumer Prices Return to Growth

Rising food prices helped lift China’s consumer inflation back into positive territory in December as the cold weather drove up the cost of some products amid the rising seasonal demand that accompanies the end of the year, an official statement said.

The consumer price index (CPI), which measures changes in prices of a select basket of consumer goods and services, rose 0.2% year-on-year in December, a reverse from a 0.5% decline the previous month, National Bureau of Statistics data showed (link in Chinese) Monday.

December’s CPI growth came in just ahead of the median estimate of a 0.1% rise (link in Chinese) by a Caixin survey of economists.


Food prices rose 1.2% year-on-year in December, a reverse from a 2% drop the previous month and contributing about 0.26% to the CPI growth. The recent spate of cold weather pushed up the costs for production, storage and transportation of fruits and vegetables, according to an NBS statement (link in Chinese).

Although pork prices shrank 1.3% year-on-year in December, they were the main driver of the CPI growth as the price decline narrowed drastically from the previous month’s 12.5% drop, economists from Nomura International (Hong Kong) Ltd. said in a Monday note.

The Nomura economists attributed higher month-on-month pork prices to “seasonally stronger pork demand usually seen toward the end of the year (especially amid the services sector recovery), tighter regulations on hog shipments across regions within China and limited pork imports due to the worsening Covid-19 situation overseas.”

The core CPI — which excludes more-volatile food and energy prices and may better reflect long-term inflation trends — was up by 0.4% year-on-year last month, down from 0.5% growth the previous one. Its year-on-year growth had remained unchanged from July to November, when the figure was down substantially from 1.5% at the beginning of last year amid fallout from the pandemic.

“With underlying inflation likely to continue rising, we think policymakers will look through the swings in food prices and tighten policy this year,” Julian Evans-Pritchard, a senior China economist with research firm Capital Economics Ltd., said in a note.

But the Nomura economists estimated that the CPI inflation for the first two months of 2021 will remain at the December level. They cited the possibility that a resurgence in domestic Covid-19 cases and subsequent stricter social distancing rules could depress demand.

“For now policymakers appear to be in ‘wait-and-see mode’ due to the resurgence of the coronavirus,” they said, estimating that policymakers would moderately normalize policies in 2021 following last year’s stimulus measures.

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The producer price index (PPI), which gauges changes in the prices of goods circulated among manufacturers and mining companies, fell 0.4% year-on-year in December, compared with a 1.5% dip the previous month. The deflation in producer prices was milder than the median estimate for a 0.6% drop in the Caixin survey.

Recovering domestic demand and rising global prices for certain commodities like crude oil have fueled the improvement in producer prices, according to the NBS and multiple economists.

Contact reporter Guo Yingzhe ( and editor Michael Bellart (

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