There was a tight supply of fresh food in China that lasted into Lunar New Year holidays. Hence, there was a sharp increase in vegetable prices, which might have accelerated food inflation in February. Housing CPI inflation is also likely to have risen slightly, mainly due to upward influences of housing inflation in big cities.
Amongst producer prices, metal and coal prices continued to rise in February. As seen in the official PMI report, the manufacturing input price PMI increased to more than 50 for the first time in 19 months. Therefore, the sequential drop in PPI is likely to narrow to 0.2% m/m in February from 0.5% m/m in January. The year-on-year rate is expected to record an improvement to 4.8% in February from -5.3% in January.
