More signs the Chinese economic rebound remains in place.
While producer prices rose strongly, Chinese consumer prices fell for the second month in a row in February. And passenger car sales rebounded strongly in February to top the levels of a year earlier.
The country’s National Statistics Bureau (NBS) reported that consumer prices fell 0.2% from February 2020 after a 0.3% dip in January.
Pushing prices lower was a fall in food costs in the month after a rise in January.
The NBS said food prices in China fell 0.2% in February from a year ago more than reversing a 1.6% annual rate in January.
February’s fall was the first drop in food costs in three months, with pork prices falling much faster (-14.9% vs -3.9% in January) after soaring in 2019 due to the African Swine outbreak.
Analysts expect the deflation to disappear in the next couple of months as pork prices normalise.
There was no spillover from a sharp rise in factory gate prices in February.
The Bureau said factory (producer) prices rose at an annual rate of 1.7% in February after a 0.3% rise in January. Producer prices rose 0.1% in February 2020.
It was the fastest pace since November 2018 in February and underlined the continuing sold pace of activity in the world’s biggest manufacturing sector.
The stronger than forecast rise will add to concerns in some markets about a surge in inflation globally.
The rise also came despite a clear easing in the pace of expansion in the Chinese economy in January and February.
But the country’s official survey of manufacturing activity expanded by the slowest pace since last May.
Capital Economics senior Chinese economist Julian Evans-Pritchard said in a note.“We do not think the recent period of consumer price deflation is likely to persist.
“Shifting pork price base effects will nudge up food inflation, a tightening labour market will push up core inflation and energy inflation will rebound thanks to rising oil prices.”
“Given that officials have signalled a hawkish tilt in recent weeks, we think the People’s Bank of China will tighten policy this year,” he said.
Car making and selling is one area of China’s economy that has rebounded strongly since the depths of the pandemic almost a year ago.
From a 79% slide in February 2020, vehicle sales recovered to more than 25 million by year’s end, only a few hundred thousand vehicles short of non-Covid 2019.
No Covid meant China’s passenger car sales surged dramatically over January and February in a further sign that consumer demand remains solid.
After a 30% rise in January, total passenger car sales jumped 337% in February from the previous year’s depressed level to 1.18 million units.
Sales in January and February totalled nearly 3.4 million units, according to the China Passenger Car Association (CPCA).
There will be a similar surge this month from March 2020 for the same reason (They fell 40% in that month from 2019).
February’s sales were actually 2% higher than in non-Covid February, 2019.
In February, 97,000 electric cars were sold, a more-than-sevenfold increase from a year earlier, but a 38% fall from January.
The Chinese government continues to ease rules on car ownership and where (limited in major cities) and is building more charging stations for EVs of all types, especially passenger vehicles.
Total vehicle sales for February will be issued on Friday and industrial production, retail sales, urban (and housing) investment figures for January-February will be issued next Monday.
