COMMENTARY
ZHU QIPING, MACRO STRATEGIST AT CHINA MINZU SECURITIES IN BEIJING
"The Lunar New Year holiday has brought up food prices, especially vegetables and fruit in Feb, which helped the CPI rebound, however, we would need to observe the sustainability of such a rise in the next couple of months, and I personally think the deflationary risk is still there.
"The PPI is in line with our expectations. The easing is mainly from the influence of raw material prices upstream, and global commodities prices also have some impact. A monetary easing policy is expected after the release of the first quarter economic data if the conditions have not improved too much after the rate and RRR cut in the past month."
DONGMING XIE, ECONOMIST AT OCBC IN SINGAPORE:
"The 1.2 percent MoM reading for CPI is a surprise for us given the meat prices did not go up much during the Chinese New Year holiday season. The price increase of vegetables and fruits seem to be the main driver.
What’s interesting is the sharp price increase of non-food item such as services, entertainment and transportation etc. The changing consumption behavior as a result of increase in national wealth may change the driver to CPI in future.
"Anyway, we think the CPI is likely to alleviate the near-term concern about the disinflation risk in China. We expect the CPI to rise further above 1.5 percent yoy in March.
"The contraction of PPI widened further. Given commodity prices are likely to remain low in the first half. The contraction of PPI may gradually move towards 5 percent on base effect in the coming months."
YAO XUEKANG, ANALYST AT ESSENCE SECURITIES IN BEIJING
China's consumer inflation quickened in February, thanks to a late Chinese Lunar New Year, which lifted the food prices and demand. But the data was still standing at a very low level, given economic slowdown and weak oil prices.
I don't expect to see sharp rises in either PPI or CPI this year. However, weak data always offer chances for the government to roll out easing policy."
ANDY JI, SENIOR CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SINGAPORE:
"China Feb CPI came in higher reflecting mainly seasonality around the Chinese New Year holiday. First, food prices, especially of fresh produce rose more than expected. Prices of vegetables and fruit were up by 14% and 9% respectively, contributing to more than half of the headline CPI.
"Second, transportation costs also rose on increased domestic traveling during holiday. Costs of air travel, long-haul bus and taxi were up by 13%, 5% and 1.5% respectively. Third, due to migrant workers returning to their homes, cost of services in general spiked higher. By contrast, non-food prices rose by a muted 0.9%.
"Similarly, core measure which excludes energy and food was unchanged at 1.6% and continue to point to acute disinflation risks. As such, softer inflation outlook from both lower commodity prices and more sluggish domestic demand remains unchanged and should not impede the more entrenched easing bias seen in recent months."
DARIUSZ KOWALCZYK, SENIOR ECONOMIST, CREDIT AGRICOLE, HONG KONG;
"China's CPI inflation surged in Feb to 1.4%YoY from 0.8%YoY, much more sharply than expected. Its rise was driven by food but included also higher core inflation (up to 0.9%YoY from 0.6%YoY).
"The statistical office said Lunar New Year was the reason behind higher inflation, although we feel this explanation is not sufficient given that last year LNY was also in Feb.
"In any case, the data confirms our view that there will be no further rate cuts considering that the PBoC said it was managing real rates and these are much lower now with higher inflation. CNY IRS rates rose after the data and will remain under upward pressure.
"China's PPI deflation deepened to -4.8%YoY in Feb, much more sharply than anticipated. The index is at its lowest since Oct 2009. The low reading reflects commodity prices but also soft domestic demand. It will keep pressure on policy makers to stimulate growth. As rebounding inflation leaves little room to cut rates, focus will turn to RRR and we expect two more cuts this year.
HAO DAMING, MACRO STRATEGIST AT HUARONG SECURITIES IN BEIJING
"The results, specifically CPI figures, are beyond our expectations, and the Lunar New Year holiday factor is partly a reason here. Big gains in vegetable and fruit prices have helped the rebound of CPI in Feb. However, the economy is still facing persistent downward pressure, so we expect an RRR cut in the short term and another rate cut in May if the April data is still no good."
MARKET REACTION
The CSI300 Index <.CSI300> of leading shares in Shanghai and Shenzhen was -0.46 percent. The yuan
BACKGROUND
-- The government has set a target of around 3 percent for inflation this year. Annual consumer inflation was 2 percent in 2014, well below the government's target of 3.5 percent.
-- Chinese leaders announced last week an economic growth target of around 7 percent for this year, below the 7.5 percent goal that was narrowly missed in 2014.
-- The People's Bank of China (PBOC) cut interest rates twice since November, on top of a cut on bank reserve requirement ratio (RRR) in February, as regulators show signs of intensifying concern over lacklustre data since the fourth quarter and growing deflationary pressures.
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