China’s consumer prices keep rising after holiday spending surge

China’s consumer prices rose during the first two months of the year as a longer-than-usual Chinese New Year holiday drove a surge in spending, though analysts cautioned that Beijing might need to implement stronger measures to boost demand to sustain the recovery.

The national consumer price index (CPI), a crucial gauge of inflation, rose by 0.8 per cent year on year during the January-February period, according to data released by the National Bureau of Statistics (NBS) on Monday.

Readings for the first two months are typically grouped together to reduce distortions from the Chinese New Year holiday period, which began in January last year and took place in February this year.

In February, consumer prices rose 1.3 per cent year on year – the largest monthly jump recorded in around three years – which the bureau largely attributed to the different timing of the extended break and a recovery in demand.

The monthly reading also beat market expectations for a 0.93 per cent increase, according to economists polled by financial data provider Wind, which did not provide a forecast for the January-February period.

“Whether this effect will be persistent beyond the holiday is not clear at this stage,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

Huang Zichun, a China economist at Capital Economics, said the conflict in the Middle East would push global energy prices and inflation higher for the time being, but suggested that China’s deflationary pressures might return unless Beijing offered further policy support.

The measures to boost domestic demand outlined by Chinese officials last week at the National People’s Congress – the annual meeting of China’s top legislature – and in Beijing’s new five-year plan were “disappointing”, Huang said, meaning “any inflationary pickup will unwind once tensions ease”.