February inflation rebound shows stabilizing economy

China's consumer inflation rate picked up in February from a five-year low of 0.8 percent in January, official data showed Tuesday, easing market concerns over deflation risks and adding to evidence that the economy has further stabilized, some analysts said.

The consumer price index (CPI), a main gauge of inflation, rose by 1.4 percent in February from the previous year, beating market expectations, data from the National Bureau of Statistics (NBS) showed Tuesday.

Food prices, which have a weight of around one-third of the CPI, grew 2.4 percent year-on-year in February and brought up the overall CPI by around 0.81 percentage point, the NBS said.

Clothing and travel services prices rose by 2.9 percent and 1.6 percent, respectively, in February from the previous year, the data showed.

The modest growth in February's consumer inflation rate was mostly attributed to a surge in prices of holiday-related items such as food and travel services during this year's Spring Festival holidays, which were held from February 18 to 24, Yu Qiumei, a senior NBS statistician, was quoted as saying in a statement posted on the NBS website Tuesday.

"February's reading beat previous market expectations, which was set between 1 and 1.1 percent year-on-year, easing market concerns over an increasing deflation risk facing China's economy," Liu Xuezhi, an analyst at the Bank of Communications in Shanghai, told the Global Times Tuesday.

After official data showed the CPI rose at its lowest pace since November 2009 at 0.8 percent year-on-year in January, media reported concerns over deflation risks to the economy. 

Yi Gang, vice governor of China's central bank, said during an interview on Tuesday that China's CPI will remain positive in the foreseeable future, the Xinhua News Agency reported Tuesday.

"China's CPI is expected to maintain a stable increase in the coming month," Zhang Liqun, a macroeconomics scholar with the Development Research Center of the State Council, told the Global Times Tuesday.

"Economic indicators released recently showed signs that China's economy has further stabilized," Liu said.

According to data released by the General Administration of Customs (GAC) on Sunday, China's exports surged 48.9 percent in February from a year earlier.

The Spring Festival holidays also had a big impact on foreign trade, but even without the holiday factor, the surge in exports was beyond expectations, Liu said.

"As festival effects gradually fade, the consumer inflation rate will likely fall to around 1 percent in March," Liu Ligang, chief China economist at ANZ Banking Group, wrote in a research note to the Global Times Tuesday.

The producer price index (PPI), a key measure of inflation at the wholesale level, is expected to remain in negative territory in March, Zhang said.

Some reports say the continuing decline in the PPI can be traced to a drop in property prices, widespread factory overcapacity, and lower oil and soft commodity prices.

According to NBS data released Tuesday, the PPI fell by 4.8 percent in February from a year earlier, lingering in negative territory for the 36th consecutive month.

The weak reading suggests that further monetary policy adjustments will be needed in the coming months," Liu said. He further predicted that the second quarter will likely see a 25 basis points cut in deposit rates. 

China has set a consumer inflation rate target of 3 percent for 2015 in Premier Li Keqiang's government work report, and Liu said a relatively high target offers leeway for monetary policy easing to spur the economy.

"The economic targets unveiled in the government work report are in line with our expectations and the GDP growth target of 7 percent is quite significant for China's economy, " Jens Eskelund, chairman of the Danish Chamber of Commerce in China, told the Global Times Tuesday.