February 3, 2023

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China consumer inflation accelerates in Dec; PPI falls with soft demand By Reuters

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© Reuters. FILE PHOTO: Customers shop for Christmas costumes at a stall in Hong Kong, China December 24, 2022. REUTERS/Lam Yik

BEIJING (Reuters) – China’s annual consumer inflation rate accelerated in December, driven by rising food prices even as domestic demand wavered amid restrained economic activity during the month.

The consumer price index (CPI) was 1.8% higher than a year earlier, rising faster than the 1.6% annual gain seen in November, data from the National Bureau of Statistics (NBS) showed on Thursday. The result matched a Reuters poll estimate of 1.8%.

The CPI for all of 2022 was 2.0% higher than the level of 2021, compared with the government target of around 3%.

The producer price index (PPI) showed an annual drop for a third straight month. In December it was down 0.7% from a year earlier, falling less than an annual contraction of 1.3% seen in November. Economists in a Reuters poll had forecast a fall of 0.1%.

The PPI for all of 2022 was up 4.1% on the previous year, the bureau said.

Growth in the economy, the world’s second-largest, was sluggish in 2022, impacted by uncompromising COVID-19 curbs for most of the year and wavering global demand.

China abandoned its strict zero-COVID measures last month, lifting lockdowns, removing quarantine and halting regular testing. The result was widespread infections that dampened consumer activity and disrupted production.

The World Bank said in a report on Jan. 10 that China’s 2022 growth in gross domestic product had slumped to 2.7%, its second slowest pace since the mid-1970s, after 2020’s 2.2%. The global lender cited pandemic restrictions, property market turmoil and drought as factors that had affected consumption, production and investment.

It predicted a rebound to 4.3% for 2023, still 0.9 percentage point below its June forecast due to the severity of COVID disruptions and weakening external demand.

China’s commerce ministry said last week that it would study and implement policies to boost consumption and that consumer demand would gradually return with continuous optimisation of epidemic control and prevention.

The property sector, slumping under huge debts, remains a drag on economic growth, but state support measures and the lifting of pandemic controls are expected to help ease the pace decline of home sales.