The rapid spread of infections in December kept many people indoors and emptied shops and restaurants, and factories were forced to close or cut production due to sick workers.
Data from China’s National Bureau of Statistics Thursday showed that the consumer price index in December rose in line with expectations by 1.8 percent year-on-year, up from 1.6 percent in November.
China’s consumer price index, a key measure of inflation, rose 2 percent year-on-year in 2022, compared to the government’s target of around 3 percent.
Producer price index data also showed an annual decline for the third month in a row. In December, it was down 0.7 percent from a year earlier, and economists polled by Reuters had expected a 0.1 percent drop.
The bureau said the producer price index for 2022 rose 4.1 percent from the previous year.
China abandoned its strict zero-COVID measures last month, lifted lockdowns and stopped regular testing.
It is noteworthy that the second largest economy in the world is still suffering from a decline in the real estate sector in light of huge debts.
economic downturn
Last week, Chinese President Xi Jinping predicted that his country’s economy would grow by at least 4.4 percent, equivalent to $17.4 trillion, in 2022, a much larger number than expected by many economists and international expert houses.
Overall, economists expected growth to decline to a rate of between 2.7% and 3.3% for 2022. The Chinese government has maintained a much higher annual growth target of around 5.5%.
The Chinese economy was affected by the widespread closure measures to confront the Corona virus, and the historical decline in the real estate sector last year. Policymakers have vowed to seek a turnaround in 2023, betting that the end of the zero-COVID policy, and a series of property support measures, will revive domestic consumption and boost growth.
But an explosion of COVID infections, triggered by the sudden easing of pandemic restrictions in early December, is clouding the outlook, as the country grapples with the largest ever spread of the COVID-19 virus.
And Beijing decided to end the quarantine requirements for those coming from abroad, starting from January 8, in a major step towards reopening its borders.
The sudden end to the restrictions surprised many in the country and put an enormous strain on the health care system.
Official data showed factory activity contracted in December at the fastest pace in nearly three years, and the official manufacturing purchasing managers’ index (PMI) fell to 47 last month from 48 in November, according to the National Bureau of Statistics.
This is the largest decline since February 2020, and it is also the third consecutive month of contraction in the index, whose reading of less than 50 indicates a contraction in activity.
The non-manufacturing PMI, which measures service sector activity, also fell to 41.6 last month from 46.7 in November, its lowest in nearly three years.
For her part, Kristalina Georgieva, Managing Director of the International Monetary Fund, said, “In the next two months, it will be difficult for China, and the impact on Chinese growth will be negative, and the impact on the region and global growth will be negative.”
Analysts also expect the Chinese economy to face a difficult start in 2023, with a possible contraction in the first quarter, as a rise in Covid cases caused a decline in consumer spending and disruption of factory activity.
However, some expected the economy to rebound after March as people came to terms with Covid, and many investment banks now expect China’s growth rate to be above 5% in 2023.
#Inflation #China #accelerated #December #line #expectations