PPI was last positive in January 2020, when it stood at 0.1 per cent before the full impact of the coronavirus.

China’s official consumer price index (CPI), meanwhile, fell to minus 0.3 per cent in January from a year earlier, from 0.2 per cent in December, according to data released by the National Bureau of Statistics (NBS).

This was below with the median results of a Bloomberg survey of analysts which had predicted a fall to zero per cent.

Rising factory gate prices indicated by the rise in PPI had been suggested by the recent purchasing managers’ indices (PMI).

Within the Caixin/Markit manufacturing PMI, average input costs continued to rise sharply during January, with the rate of inflation only easing slightly from December’s three-year high. Respondents reported increased raw material prices and supplier shortages drove up expenses in January.

Dong Lijuan, senior analyst from the NBS, said that the recovery of domestic demand and increasing prices of global commodities such as crude oil and iron ore sent PPI higher last month, particularly in ferrous metal smelting and the rolling processing industry, which saw factory gate prices rise 10 per cent from a year earlier.

China’s core consumer inflation rate, excluding volatile food and energy prices, stood at minus 0.3 per cent in January, down from 0.4 per cent in December.

Food prices rose 1.6 per cent last month, up from a rise of 1.2 per in December compared to a year earlier.

The price of pork – a staple meat on Chinese dinner tables – rose 5.6 per cent in January from December. Compared to a year earlier, pork prices were down 3.9 per cent in January, compared to a decline of 1.3 per cent in December.

Non-food prices fell to minus 0.8 per cent in January year on year, up from a flat reading of 0.0 per cent the previous month.

“Headline consumer price inflation slipped back into negative territory last month. But this was largely due to base effects. Meanwhile, producer price inflation turned positive for the first time since the Covid-19 outbreak as economic activity continued to improve. We think price pressures are likely to pick up further in the coming quarters,” said economists Sheana Yue and Mark Williams at Capital Economics.

“Encouragingly, there are signs that demand side pressures have continued to strengthen last month. Producer price inflation returned to positive territory for the first time since January 2020.”

Dong from the NBS said while food prices rose last month, the overall CPI dropped compared to the same period last year mainly because of a high base with the Lunar New Year in 2020 falling in January.

“The core CPI, excluding food and energy prices, fell by 0.3 per cent year on year, mainly due to the large year-on-year drop in service prices. Last January coincided with the Spring Festival, and the impact of the coronavirus pandemic had not yet appeared,” Dong said.

“Chinese New Year is in February this year, coupled with the sporadic outbreaks of the pandemic, people’s spending on travel and some contact services decreased last month … the prices of air tickets and travel agency fees fall by 33.2 per cent and 9.9 per cent respectively from a year earlier.”