China: CPI inflation likely negative in February – Standard Chartered

Official manufacturing PMI rebounded in February; 2-month average suggests steady production activity. Trade performance likely weakened last month due to both the holiday and tariff impact. CPI may have dropped y/y on a fall in prices of food, fuel and services, as well as a high base effect. Retail sales and FAI growth likely edged up on policy support, while IP growth may have moderated, Standard Chartered's economists report.

A mixed start to the year

"The official manufacturing PMI rebounded to 50.2 in February from 49.1 in January after the Lunar New Year holidays. The average new orders and production PMIs for 2M-2025 were 50.2 and 51.2, respectively, indicating steady manufacturing activity. We therefore expect industrial production (IP) growth to have stayed resilient at 5.0% y/y over the period. Expansion of the equipment upgrade and consumer goods trade-in programmes likely supported fixed asset investment (FAI) and retail sales growth."

"The US has imposed additional tariffs on all of its imports from China since early February to date. We expect 2M-2025 trade activity to have been affected, with export growth slowing and import growth turning negative over the period. CPI inflation likely fell to -0.6% y/y in February due to a high base and a decline in food, services and fuel prices. Meanwhile, PPI deflation may have moderated on higher metal and construction material prices."

"We expect total social financing (TSF) outstanding growth to have edged up 0.4ppt to 8.4% y/y in February. New CNY loan growth likely remained stable at 7.5% y/y. In addition, government bond financing remained sizeable to support project financing."