Coronavirus Helps Drive China Consumer Prices to Highest in Over 8 Years

China’s consumer inflation rose to its highest level in more than eight years in January as hundreds of millions of Chinese struggled to cope with a deadly coronavirus outbreak that has raised anxiety levels and pushed up the prices of many household goods.
China’s consumer-price index climbed 5.4% in January from a year earlier, the highest reading since October 2011, the National Bureau of Statistics said Monday. The key inflation reading was higher than December’s 4.5% rise and topped economists’ expectations.
January’s pickup in inflation was driven by the Lunar New Year, which normally boosts demand for consumer goods, and by the coronavirus outbreak, said Dong Lijuan, an analyst with the statistics bureau, in a statement.
In Hubei province, which has been hit hardest by the outbreak, consumer inflation slightly outpaced the national average at 5.5% in January — a number that points to relatively steady price levels, Ms. Dong said.
Local residents, however, have been feeling more sticker shock from the outbreak than the official data from January suggest. Locals say panic buying began in Wuhan, the capital of Hubei and the epicenter of the outbreak, following authorities’ decision to lock down the city of 11 million people on Jan. 23.
The death toll from the outbreak began climbing in mid-January, and now surpasses that of severe acute respiratory syndrome, or SARS, nearly two decades ago, having killed more than 900 people, most of them in Hubei.
It’s unclear how fully the newly released data capture the economic effects of the epidemic, said Liu Xuezhi, an economist at China’s Bank of Communications, who said the coronavirus’s impact on demand for consumer products is likely greater than the January inflation data showed.
People are shopping less and eating out less for fear of contracting the virus, which should outweigh the impact from supply disruptions, said Mr. Liu, who expects consumer inflation to ease slightly in February, given softer demand and an expected recovery in supplies.
Like many in the epicenter, Wang Xuan, 36, a teacher at a Wuhan university, has since the lockdown began rarely stepped outside her apartment, which isn’t far from the wet market — believed by many as the source of the new virus.
“Things are definitely more expensive but we are just happy there is food to buy,” Ms. Wang said. She said her family members were initially living off food that they had prepared for the Lunar New Year holiday, at least until local officials began ensuring a supply of fresh groceries in February.
Other Wuhan residents, who fear contracting the virus at local supermarkets, have tried to buy supplies from smaller street vendors. Some said some fresh vegetables were going for as much as 140 yuan ($20) a kilogram, compared with roughly 20 yuan before the outbreak.
Across the country, food prices in January rose 20.6% from a year earlier, accelerating from a 17.4% increase in December.
Pork prices, which surged for most of the latter half of 2019 due to an outbreak of African swine fever, resumed their acceleration in January after easing somewhat in December. Pork prices surged 116% in January from a year earlier, versus a 97% increase in December. Pork prices alone boosted headline overall consumer inflation by 2.76 percentage points in January. Nonfood prices, such as services and other living costs, also accelerated in January.
Strong inflation, however, is unlikely to hinder Beijing’s efforts to spur economic growth after the coronavirus hit, economists say. Beijing has stepped up its support for the virus-hit economy, which is reeling from plummeting consumer spending during a traditional boom season and factory production that has been suspended for a prolonged period. Authorities have signaled that they are prioritizing growth over other policy goals, such as reining in debt and inflation.
Despite weaker demand that could curb inflation, a second case of avian flu in China, reported over the weekend in Sichuan province, is raising concerns over rising poultry prices. China’s agricultural ministry had reported another case in Hunan province earlier this month.
Amid the gloom, there was some good news on the inflation front. Monday’s data showed China’s industrial prices climbed out of deflationary territory in January, rising for the first time in seven months.
The producer-price index, a gauge of factory-gate prices, edged up 0.1% in January from a year earlier, compared with a 0.5% year-over-year decline in December. Economists had expected the index to stay flat in January from a year earlier.
That said, any further increase in industrial prices is likely to be curbed in coming months amid soft demand for industrial products, said Yang Weixiao, an economist at Founder Securities
https://www.marketscreener.com/news/Coronavirus-Helps-Drive-China-s-Consumer-Prices-to-Highest-Level-in-Over-Eight-Years–29969680/