CN: Consumer Price Index

Thu Mar 08 19:30:00 CST 2018

Consensus Actual Previous
Y/Y % Change 2.4% 2.9% 1.5%
M/M % Change 1.2% 0.6%

China's headline consumer price index increased by 2.9 percent on the year in February, up from 1.5 percent in January and above the consensus forecast of 2.4 percent. This is the highest level of inflation since 2013. The index rose 1.2 percent on the month in February after an increase of 0.6 percent previously.

Food prices were the main factor pushing up headline inflation in February, increasing by 4.4 percent on the year after falling by 0.5 percent in January. Non-food price inflation, however, also accelerated, picking up from 2.0 percent to 2.5 percent, with stronger price increases for transport and communication offset by a weaker increase in housing costs. Urban inflation rose from 1.5 percent in January to 3.0 percent in February, while rural inflation advanced from 1.5 percent to 2.7 percent.

The sharp increase in headline CPI inflation in February likely reflects to some extent the impact of the timing of lunar new holidays, which took place in mid-February this year but in late January in 2017. Looking at year-to-date data corrects for this impact, with the year-to-date increase in the consumer price index at 2.2 percent in February, up more moderately from the year-on-year increase of 1.8 percent recorded in December.

Earlier in the week the Chinese government announced at annual meetings of the National People's Congress that it will target inflation at "around 3 percent" in 2018 as it did in 2017.

Consumer Price Index (CPI) is an index that measures changes over time in the price level of consumer goods and services purchased by residents, which reflects the overall changes in price level.

Consumer prices account for a majority of overall inflation, which is carefully monitored by investors worldwide. Investors worldwide monitor Chinese price changes closely. A pickup in inflation could mean an increase in interest rates is in the offing from the People's Bank of China while an easing could mean looser monetary policy. The monthly CPI is broken down by 8 categories with more detail available on the following day including aggregate information by urban and rural areas and provinces.

The CPI measures the change in the level of prices for a specified basket of goods and services normally purchased by urban and rural residents. Approximately 226 areas throughout the country are covered, including 80 counties and 146 cities. The current CPI is an annually chained Laspeyres price index and has been available since 2001. From 1978 to 2000, the index was compiled using current year weights for most items.