China’s January-February CPI falls 0.1% days after annual inflation control target lowered

Just days after China lowered its annual consumer inflation control target from around 3 per cent to around 2 per cent – following two years in which the actual reading has languished at 0.2 per cent – the National Bureau of Statistics said February’s consumer price index (CPI) fell 0.7 per cent year on year.

The inflation gauge for the first two months of this year – including the movable Lunar New Year holiday – dropped 0.1 per cent compared with the same period last year, the bureau announced on Sunday.

Economists polled by Chinese financial data provider Wind had forecast the CPI would decline by 0.35 per cent last month.

Food prices declined by 3.3 per cent year on year in February, while service prices fell by 0.4 per cent.

Core inflation, which excludes volatile food and energy prices, fell 0.1 per cent year on year last month. It rose 0.3 per cent year on year in the January-February period.

China’s producer price index (PPI), which tracks the cost of goods at the factory gate, fell by 2.2 per cent, compared with a 2.3 per cent drop in January. It marked the 29th consecutive month of contraction.

“China’s economy still faces deflationary pressure,” said Zhiwei Zhang, chief economist of Pinpoint Asset Management.