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MNI REALITY CHECK: China CPI Set For Further Negative Print

MNI (Beijing)

China consumer prices likely held in negative territory in February, weighed down by higher base comparisons from a year ago

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China consumer prices likely held in negative territory in February, weighed down by higher base comparisons from a year ago when the initial outbreak of Covid-19 had largely lifted food prices, analysts told MNI.

February CPI could fall 0.2% from a year earlier due to the high base, compared to the 0.3% decline in January, said Ying Xiwen, head of macro and regional economic research at China Mingsheng Bank. However, CPI may rise slightly on a monthly basis, Ying noted, due to the week-long Chinese New Year holiday last month.

Food prices rose around 0.5% y/y in February, according to Ying's calculation. Though the holiday factor had pushed up the prices of some food, the cost of pork and vegetable dropped significantly after the holiday, limiting the overall increase in food prices, said Ying. He also noted that the price increase in food was lower than previous years, given that local authorities had increased supply to encourage migrant workers to stay in place during the holiday.


Pork prices have been on a continuous decline this month, said Pan Tingting, analyst at, an agricultural data and information provider. The average wholesale swine carcass price was CNY39.1 per kilo in February, down 13.55% m/m and 16.75% y/y.

Despite the seasonal post-holiday demand dip, supply rose as pig breeders' accelerated sales of even small hogs due to resurging swine fever fears, as well as an increased release of frozen meats, said Pan. She noted that the recent sporadic outbreaks have damaged sow productivity which will lead to a decrease in slaughter from May to August and may push up prices periodically later.

But in general, meat prices will trend downwards, as pig production capacity has returned to about 92% of normal years, said Pan.

The average price of vegetables was largely flat from the previous month, with production restored amid warmer weather, according to analysts from Huachuang Securities.

The price index of a basket of vegetables released by the Ministry of Agriculture and Rural Affairs was 143.94 in February, up 1.70% from January, but slowing from the 9.99% increase in the previous month.


As for non-food categories, workers staying at work locations to spend the holiday boosted urban consumer demand, which is expected to lift related services prices, though the tourism and hotel sector may find it difficult to enjoy a normal holiday bonanza, said Ying.

February non-food prices remain lower than a year earlier, Ying added.

Fuel costs rose on the government's move to hike the domestic gasoline price in February, rising by CNY275 per ton. For car owners, it will cost an additional CNY11 to fill an average 50 litres tank, according to Lu Xingjun, analyst at, a Shandong-based commodity data provider. This was the seventh government price hike since last November, and it is likely to continue into March on higher international crude oil prices, Lu added.

Gasoline consumption this month was better than expected with sporadic outbreaks of Covid-19 under control, said Lu, noting that both the growing demand and surging crude oil prices have boosted gas stations' enthusiasm for restocking and hoarding.

Lu noted that the average wholesale price of gasoline nationwide jumped 15.7% m/m to record CNY6,741 per ton by end-February, while that of diesel also rose 13.86% to CNY5,490 per ton.

The median of analysts' expectation of February CPI polled by Bloomberg was -0.3%.