Rise in China CPI to early-2013 high expected to be short-lived

Chinese consumer prices surged last month, but economists expected the acceleration to be short-lived, paving the way for monetary policy to be eased in the Asian giant later in 2018.

According to the National Bureau of Statistics, the year-on-year rate of gains in consumer prices in China hit 2.9% in February (consensus: 2.3%), up from 1.5% in January, as food price inflation picked-up from -0.5% in January to 4.4% last month.

However, Julian Evans-Pritchard at Capital Economics attributed the quicker rate of gains in food prices to the changes in the timing of the Chinese Lunar New Year, which in 2018 fell in February, instead of in January, with the cost of vegetables and fruits climbing sharply ahead of the holidays.

The drop seen in the prices of those same foodstuffs following the Lunar New Year last year was also expected to translate into a higher rate of CPI in coming months, but would be short-lived, he said.

"In fact, we think that a decline in broad price pressures – driven in part by a further easing in healthcare and rental cost inflation – will open the door to monetary policy easing later in 2018," Evans-Pritchard added.

Factory gate inflation on the other hand slowed down, with the rate of gains in prices decreasing from 4.3% in January to 3.7% for February (consensus: 3.8%), as disruptions on the back of Beijing's recent anti-pollution campaign reportedly eased.