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Chinese Factory Prices Rise, Indicate Continuous Recovery From COVID-19 Impact By

© Reuters.

By Gina Lee – Chinese factory gate prices fell at their slowest pace since February 2020 in December, an indication that the manufacturing sector in the world’s second largest economy continues its rapid recovery from the impact of COVID-19.

Data released by the National Bureau of Statistics (NBS) earlier in the day showed that the contracted 0.4% year-on-year in December, higher than the 0.8% drop in forecasts prepared by and November’s 1.5% decline.

The industrial sector has seen a quick rebound from the strict lockdowns seen in early 2020. The pace of recovery. The pace of this recovery led some investors to believe the People’s Bank of China (PBOC) could begin unwinding loose monetary policy.

However, PBOC Governor Yi Gang said on Friday China will prioritize stability in monetary policy in 2021.

“With economic activity set to remain strong and underlying inflation likely to continue rising, we think the PBOC will tighten policy this year,” Capital Economics senior China economist Julian Evans-Pritchard told Reuters.

The NBS data also showed that December’s consumer price index (CPI) rose 0.7% and 0.2% in December. The pair also beat expectations, with the index forecasted to rise 0.4% month-on-month and 0.1% year-on-year. The CPI returned to growth in December, after seeing declines of 0.6% month-on-month and 0.5% year-on-year during the previous month, as food prices rebounded.

Food prices rose as extreme cold weather drove the transportation costs of fresh vegetables and fruit higher while holiday demand drove up meat product prices, NBS senior statistician Dong Lijuan told Reuters.

Prices saw a 1.2% increase from a year ago, compared with a decline of 2.0% in November. However, some investors expect a drop in pork prices due to the replenishment of hog stocks, to weigh on consumer prices over the next couple of months.

Further data, including , and , is due to be released on Thursday.

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