By Ambar Warrick
Investing.com -- Chinese consumer price inflation grew less than expected in January, data showed on Friday, as rising COVID-19 cases kept spending limited despite the lifting of most restrictions, while worsening factory inflation showed that the manufacturing sector remained under pressure.
The consumer price index (CPI) grew at an annualized 2.1% in January, data from the National Bureau of Statistics showed, more than the 1.8% seen in December but below expectations of 2.2%.
On a monthly basis, CPI inflation grew more than expected to 0.8%, improving sharply from the 0% reading seen in December.
While the reading reflects some recovery in spending after the relaxing of anti-COVID measures, it also shows that rising COVID-19 cases and worsening economic conditions kept Chinese consumers wary of spending big.
Spending was also boosted by the week-long Lunar New Year holiday, albeit slightly. But Friday’s data shows that the Chinese economy faces a long road to reaching pre-pandemic levels of growth, denting market expectations for a swift recovery in the economic giant.
China’s producer price index (PPI) shrank at an annualized 0.8% in January, worse than December’s reading of negative 0.7% and below expectations for a drop of 0.5%.
The reading, coupled with middling business activity data for January, shows that some facets of the world’s second-largest economy are still struggling from rising COVID-19 cases and worsening global economic conditions.
While local businesses struggled to navigate high COVID-19 cases, they also faced weakening overseas demand for their goods, amid slowing economic activity across the globe. The weak inflation reading also follows a private survey last week, which showed that the manufacturing sector remained in contraction through January.
The soft inflationary trends may invite more stimulus measures and interest rate cuts from the government, as it struggles to shore up economic growth. Beijing recently reiterated its commitment to sprucing up economic activity this year by encouraging consumption and pumping more money into the economy.
But that bodes poorly for the Chinese yuan, which is already struggling under the wide gap between local and foreign interest rates. The currency sank 0.2% after Friday’s reading.