China inflation: rise in demand due to eased Covid-19 curbs forecast to drive up consumer prices
- China’s consumer price index rose by 2.5 per cent in June from a year earlier, up from a rise of 2.1 per cent in May
- The producer price index, which reflects the prices that factories charge wholesalers for products, grew by 6.1 per cent in June, but dropped from a rise of 6.4 per cent in May
Increased demand due to the easing of coronavirus restrictions could contribute to a rise in China’s consumer inflation later this year, analysts said, even after prices remained stable last month.
This was above expectations, with CPI having been expected to increase by 2.4 per cent last month, according to Chinese financial data provider Wind.
While China is on a recovery path, as the economy unlocks amid accommodative policies, there are still downside risks from renewed lockdowns and another recession as long as Beijing sticks to its zero -Covid strategy, according to a Nomura report.
We expect CPI inflation to keep rising in the second half, as the domestic economy recovers from the lockdown in the first, and the pork price cycle turns inflationary after a long period of deflation
Across all economies, the report added, high inflation is expected to persist as the world “enters a stagflationary environment”.
China has set a consumer inflation target of “around 3 per cent” for the year.
Zhang Zhiwei, chief economist at Pinpoint Asset Management, expects CPI inflation to rise above 3 per cent in the second half.