China CPI recovers on food prices
Print Edition
CHINA’S inflation rebounded in February, largely due to the Chinese New Year that bolstered the prices of foods and services, the National Bureau of Statistics said yesterday.
The Consumer Price Index, a main gauge of inflation, expanded 1.4 percent from a year earlier last month, up from the pace of 0.8 percent in January, the official data showed.
Food prices, which account for nearly one third in the CPI basket, rose 2.4 percent last month, much faster than the increase of 1.1 percent in January.
The costs of services also grew 2.2 percent, compared with a rise of 1.3 percent a month ago. It was one of the contributors to the overall CPI growth.
Yu Qiumei, a bureau researcher, said seasonal factor was the main reason for the unexpected turnaround. “The robust demand during the Chinese New Year helped lift prices of fresh vegetable and fruit, while the costs of transport and tourism also jumped as more people chose to spend the holiday on travels,” Yu said.
Liu Ligang, chief economist at Australia & New Zealand Banking Group, said that as the festival effects fade, the CPI inflation will likely return to around 1 percent this month.
Liu said deflation risks, however, still remained.
The Producer Price Index, the factory-gate measurement of inflation and a harbinger of future prices at the consumer end, fell 4.8 percent in February, down further from a drop of 4.3 percent in the previous month.
“The weak inflation profile suggests that further monetary policy easing will be needed to fight against rising deflation risk,” Liu said. “The easing effort so far has been limited.”
Chang Jian, an economist with Barclays, also said China’s deflation risks remained significant and needed further monetary easing.
“In our view, the monetary policy needs to be more proactive in order to deal with the cyclical challenges in the near term,” Chang said. “We maintain our forecast of at least two more reserve requirement ratio cuts in the first half and one benchmark interest rate cut in the second quarter.”
To counter the economic weaknesses, China’s central bank announced a surprising interest rate cut in February.
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