Dearer food pushes up inflation
By Wang Yanlin |
February 10, 2012, Friday
|
Print Edition
Print Edition
China's inflation rose to a three-month high in January, an unexpected increase that was mainly due to higher food prices.
The Consumer Price Index, the main gauge of inflation, rose 4.5 percent from a year earlier last month, up from December's 4.1 percent and November's 4.2 percent, the National Bureau of Statistics said yesterday.
Food costs, nearly a third of the basket, climbed 10.5 percent last month from the previous year, up from December's 9.1 percent and November's 8.8 percent.
"The outcome is quite contrary to market expectations which predicted inflation would continue to moderate," said Liu Ligang, an economist at the Australia and New Zealand Banking Group. "The result may delay certain easing moves, like a reserve requirement ratio cut, due to the possible rebound in inflationary pressure."
On Wednesday, China raised fuel prices by more than 3 percent and commodity prices on the global market have also been rising in recent months. Both could bolster inflation, Liu said.
Wang Tao, an economist at UBS, said the spike in the CPI would make policymakers more cautious about sending monetary easing signals in the immediate term.
"The market should not expect any reserve requirement ratio cut as a signal for easing in the next few weeks," Wang said. "Moreover, it is still difficult to discern the real strength of the economy at the current stage."
China's gross domestic product growth weakened to 8.9 percent in last year's final quarter, the slowest pace in two and a half years.
Earlier this week, the International Monetary Fund warned that China's economic growth rate could be almost halved if Europe's economy experiences a sharp downturn. The IMF forecast 8.2 percent growth this year for China but said that could be reduced by up to 4 percentage points if Europe's crisis got worse.
However, Wang said the inflation trend was still downward.
The Producer Price Index, which measures inflation at the factory gate, expanded 0.7 percent year on year in January, compared with 1.7 percent in December.
Zhu Haibin, an economist at JP Morgan, said that since January included the Spring Festival, February's CPI figure would have a greater influence on policy.
He expected inflation this month to be around 4 percent, but to moderate in the next two quarters until it hits around 2.8 percent.
Lu Zhengwei, chief economist at Industrial Bank, expected CPI growth to return to 3.5 percent this month due to a higher comparative base and the elimination of seasonal factors.
China's CPI settled at an annualized 5.4 percent in 2011, compared to the 4 percent target. Economists expect the rate be around 4 percent this year.
The Consumer Price Index, the main gauge of inflation, rose 4.5 percent from a year earlier last month, up from December's 4.1 percent and November's 4.2 percent, the National Bureau of Statistics said yesterday.
Food costs, nearly a third of the basket, climbed 10.5 percent last month from the previous year, up from December's 9.1 percent and November's 8.8 percent.
"The outcome is quite contrary to market expectations which predicted inflation would continue to moderate," said Liu Ligang, an economist at the Australia and New Zealand Banking Group. "The result may delay certain easing moves, like a reserve requirement ratio cut, due to the possible rebound in inflationary pressure."
On Wednesday, China raised fuel prices by more than 3 percent and commodity prices on the global market have also been rising in recent months. Both could bolster inflation, Liu said.
Wang Tao, an economist at UBS, said the spike in the CPI would make policymakers more cautious about sending monetary easing signals in the immediate term.
"The market should not expect any reserve requirement ratio cut as a signal for easing in the next few weeks," Wang said. "Moreover, it is still difficult to discern the real strength of the economy at the current stage."
China's gross domestic product growth weakened to 8.9 percent in last year's final quarter, the slowest pace in two and a half years.
Earlier this week, the International Monetary Fund warned that China's economic growth rate could be almost halved if Europe's economy experiences a sharp downturn. The IMF forecast 8.2 percent growth this year for China but said that could be reduced by up to 4 percentage points if Europe's crisis got worse.
However, Wang said the inflation trend was still downward.
The Producer Price Index, which measures inflation at the factory gate, expanded 0.7 percent year on year in January, compared with 1.7 percent in December.
Zhu Haibin, an economist at JP Morgan, said that since January included the Spring Festival, February's CPI figure would have a greater influence on policy.
He expected inflation this month to be around 4 percent, but to moderate in the next two quarters until it hits around 2.8 percent.
Lu Zhengwei, chief economist at Industrial Bank, expected CPI growth to return to 3.5 percent this month due to a higher comparative base and the elimination of seasonal factors.
China's CPI settled at an annualized 5.4 percent in 2011, compared to the 4 percent target. Economists expect the rate be around 4 percent this year.
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