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China's consumer inflation rate rises for first time in six months. But the holiday boost is likely to fade

·1 min

China’s consumer inflation turned positive for the first time in six months due to a spending boom during the Lunar New Year holiday. The Consumer Price Index (CPI) increased by 0.7% in February, exceeding the 0.3% forecast. However, some analysts believe it is premature to conclude that deflation in China is over, citing weak domestic demand. The People’s Bank of China (PBOC) has been cutting interest rates to boost bank lending and bring inflation back to its 3% target. Services prices, particularly in tourism and entertainment, were strong in February but are expected to decline in March. Producer deflation intensified, with wholesale prices at the factory gate dropping by 2.7% YoY. The PBOC and the government are exploring measures to stimulate growth and fight deflation, including monetary easing and initiatives to spur consumer spending. The success of these initiatives will determine future growth and rising prices in China.