China's factory gate prices notch their first rise in 12 months 

Consumer prices unexpectedly fall 0.3% in January - mostly due to non-food inflation and compared with 0.2% rise in December - in sign that demand is weaker than hoped

China's factory gate prices notch their first rise in 12 months 
China's factory activity grew at the slowest pace in five months in January, official data showed, reflecting the coronavirus outbreak's impact on production as well as services, analysts said. File photo by Reuters.

(ATF) China's factory gate prices rose in annual terms in January for the first time in 12 months and at the fastest rate since May 2019, official data showed on February 10.

The data indicated there was gathering growth momentum for the world's second-largest economy, although consumer prices fell, suggesting that demand was weaker than hoped.

The producer price index (PPI) rose 0.3% from a year earlier, the National Bureau of Statistics said in a statement. PPI declined 0.4% in December.

The data are unlikely "to rock the inflation boat", Michael McCarthy, chief strategist at CMC Markets in Sydney, said.

The Chinese economy is expected to grow 8.4% this year, following a 2.3% rise in 2020 in the wake of the Covid-19 pandemic that forced the country to shut down for much of the March quarter last year.

A resurgence of the disease last month, although mostly isolated in Hebei province surrounding Beijing and the northeastern provinces, raised concerns about temporary disruptions to production.

FACTORIES SLOW

China's factory activity grew at the slowest pace in five months in January, official data showed. That reflected the outbreak's impact on production as well as services, analysts said.

"We think price pressures are likely to pick up further in the coming quarters," Sheana Yue, assistant economist at Capital Economics, said.

The consumer price index (CPI) unexpectedly fell 0.3% in January from a year earlier, the statistics bureau said in a separate statement, compared with a 0.2% rise in December. 

"That mirrors other data like [purchasing managers' index readings] that show growth momentum sagging on weak demand," said Trinh Nguyen, senior emerging Asia economist at Natixis. "It now reveals that demand is a challenge and the People's Bank of China is going to pay attention."

Most of the decrease was the result of a fall in non-food inflation, which was largely due to base effects. "This more than offset the seasonal rise in food prices ahead of the Lunar New Year festival, which nudged up food inflation from 1.2% year on year to 1.6%," Yue said.

With reporting by Reuters

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