China inflation eases as food prices drop

Chinese inflation eased in January as food prices fell and factory gate inflation slowed, official figures showed.

Consumer inflation slowed to an annual rate of 0.9% from 1.5% a month earlier and was lower than the 1% average economists' estimate. Producer price inflation eased to 9.1% from 10.3%, undershooting expectations for a 9.5% reading.

A 3.8% decline for food prices was the main reason for consumer price inflation dropping to its lowest since September. Services price rises strengthened to 1.7% from 1.5%.

Producer price inflation dropped to its lowest since July with the decline broad-based with the biggest drops in mining. Clothing and durable consumables were the only sub-sectors to experience stronger price rises.

Craig Botham, a China specialist at Pantheon Macroeconomics, said consumer price rises would have eased more if not for the effect of an earlier new year holiday.

"We think food prices will remain in deflationary territory until June, while both energy and core inflation should continue to slow in y/y terms, assuming no repeat of the energy crisis, and thanks to falling PPI," Botham said.

"Looking ahead, high base effects alone pretty much guarantee a continued deceleration in PPI inflation. While rising oil prices might exert some counterbalancing pressure, the authorities are still acting to limit energy costs, while broad industrial commodity prices have been stable."