By Gina Lee

Investing.com – China’s factory inflation fell to the slowest annual pace in eight months in February 2022, thanks to the seasonal effects of the Lunar New Year holiday. It is expected to increase as global commodity costs rise, however investors are optimistic.

According to the National Bureau of Statistics, 8.8% of all ages grew year over year. The 8.7% increase predicted by Investing.com was not met, but it was more than the 9.1% recorded in the preceding month.

The Consumer Price Index (CPI) grew 0.6%. This is higher than the 0.3% forecasted growth by Investing.com, and the 0.4% increase recorded over the past month. CPI rose 0.9%.

The Lunar New Year, fluctuations in energy prices and consumer prices rose slightly in January but they were relatively stable in comparison to 2021’s same period. NBS senior statistician Dong Lijuan stated in a statement that the prices of consumers increased slightly. According to the statement, producer prices rose in January as a result of rising costs for international commodities like non-ferrous materials.

Due to the Lunar New Year holidays in February, many Chinese factories had to close and there was a lower demand for raw materials. But, supply disruptions are a concern in Ukraine, which is pushing global commodities and energy prices to their highest levels for ten years.

Julian Evans-Pritchard, Capital Economics Senior China Economist told Reuters that the surge in commodity prices after Russia invaded Ukraine would have a more pronounced effect on March figures.

China is facing challenges in its efforts to stabilize commodity price volatility. This includes high iron ore, coal and ash prices due to COVID-19. It is a monetary policy shift that occurs in large economies and geopolitical conflict, according to an official from the state economic planner.

Some investors believe that the potential for monetary easing is limited by higher commodity prices.

Bruce Pang from China Renaissance Securities, Head of Macro and Strategy Research Bruce Pang stated to Reuters that Russia sanctions could halt China’s trade activities and lead to higher import prices.

China may be facing a rise in commodities prices that could increase its PPI inflation. This would also limit China’s ability to impose monetary easing.

The country targeting a 2022 CPI target of 3% on Saturday, unchanged from 2021’s target.