(Yicai) March 10 -- China’s consumer inflation declined last month for the first time since January last year, mainly because of the Chinese New Year holiday. Meanwhile, the cost of goods at the factory gate continued to fall but at a slower pace.

The consumer price index dropped 0.7 percent in February from a year earlier, compared with a 0.5 percent rise the previous month, the National Bureau of Statistics said yesterday. On a monthly basis, the CPI fell 0.2 percent.

The decline was mainly because of a high comparison base, NBS statistician Dong Lijuan said. The Chinese New Year holiday fell in January this year, while it was in February last year. As a result, food and service prices were much higher in February last year than this year, creating a high base effect.

Excluding the seasonal impact of the Chinese New Year holiday, the CPI would have risen 0.1 percent last month from a year earlier, according to NBS estimates.

Food prices in China plunged 3.3 percent in February from the same period last year, dragging the CPI down by about 0.6 percentage point and becoming the main factor contributing to the shift to deflation. Air tickets and overall tourism prices fell nearly 23 percent and 9.6 percent, respectively.

Favorable weather conditions for vegetable production and transportation and price cuts and promotions for automobiles also contributed to the CPI decline, Dong added. In February, vegetable prices fell 12.6 percent from a year earlier, while prices of fossil fuel-powered and new energy vehicles dropped 5 percent and 6 percent, respectively.

The CPI is expected to rebound and grow 0.1 percent in March from the same period last year, mainly because of a low base effect, Wang Qing, chief macroeconomic analyst at Golden Credit Rating, told Yicai. The weak price trend early this year leaves ample room for policies to boost consumption and interest rate cuts by the central bank, he added.

Factory-Gate Prices

The producer price index fell 2.2 percent in February from a year earlier, down from a 2.3 percent decline in January, according to NBS data. On a monthly basis, the PPI dropped 0.1 percent.

Prices in the ferrous metal smelting and pressing industry sank 10.6 percent last month from the same period last year because of weaker demand for construction materials during the Chinese New Year holiday, Dong said. Moreover, ample coal supply during the holiday led to a 25 percent drop in coal processing prices.

Oil extraction, organic chemical raw material manufacturing, and refined petroleum product prices plunged 5.1 percent, 4.5 percent, and 1.6 percent, respectively, in the period, mainly because fluctuations in international oil prices dragged down domestic petroleum-related industries.

Meanwhile, the gradual effects of macroeconomic policies and increased demand in some industries helped narrow the PPI decline.

Slowing exports due to trade friction may continue to suppress industrial product prices, Wang noted. China’s PPI could continue falling by around 2 percent in March from a year earlier, he added.

Editor: Futura Costaglione