China_ January CPI inflation ticked up on LNY effect_ PPI remained in deflation zone. Sun Feb 09 2025

Summary of J.P. Morgan's Economic Research on China: January CPI Inflation Industry Overview - Industry: Economic Research focusing on China's inflation metrics, specifically Consumer Price Index (CPI) and Producer Price Index (PPI) trends. Key Points CPI Inflation Trends - CPI Inflation Rate: Increased to 0.5% year-over-year (YoY) in January 2025, up from 0.1% YoY in December 2024, aligning with J.P. Morgan's expectations of 0.5% and above the consensus of 0.4% [1][4] - Lunar New Year (LNY) Effect: The uptick in CPI is attributed to the timing of the LNY holiday, which occurred in January this year compared to February last year [1][4] - Sequential Decline: Seasonally adjusted, CPI fell by 0.1% month-over-month (MoM) in January, marking the fifth consecutive monthly decline [1][4] Food and Non-Food Prices - Food Prices: Rose modestly by 0.4% YoY in January, recovering from a decline of 0.5% YoY in December. However, food prices fell by 0.6% MoM seasonally adjusted [2][4] - Non-Food CPI: Increased to 0.5% YoY in January, up from 0.2% YoY in December, with energy prices showing mixed trends [3][5] Producer Price Index (PPI) Trends - PPI Deflation: Continued to show significant deflation at -2.3% YoY in January, unchanged from December. Seasonally adjusted, PPI fell by 0.1% MoM [7][11] - Sector-Specific Trends: Easing prices in industrial metals and construction materials were noted, while energy-related PPI saw a slight increase due to global oil price dynamics [8][11] Economic Outlook - Deflationary Pressures: Ongoing deflationary pressures are concerning, with significant demand-supply imbalances. The CPI inflation rate is expected to ease again in the coming months, with a forecast of an average CPI inflation of 0.2% for 2025 [9][12] - Consumer Confidence: The consumer confidence index remained subdued at 86.4 in December, indicating persistent concerns regarding job and income uncertainty [10][12] Policy Implications - Policy Support: There is an increasing focus on policies to boost consumption and mitigate deflationary pressures, including trade-in subsidies and support for low-income households [12][12] - Forecast Adjustments: The average PPI deflation is projected at -1.1% for 2025, reflecting ongoing challenges in the Chinese economy [12][12] Additional Insights - LNY Impact on Services: Notable spikes in prices for travel and entertainment services were observed due to the LNY holiday, with air ticket prices rising by 27.8% MoM [6][6] - Weak Pricing Power: The overall pricing power for consumer goods and services remains weak, exacerbated by ongoing economic uncertainties and housing market stress [10][12] This summary encapsulates the critical insights from J.P. Morgan's economic research on China's inflation dynamics, highlighting the interplay between seasonal effects, consumer behavior, and broader economic challenges.