Tue, Oct 15, 2013 - Page 15 News List

China inflation hits seven-month high

MAIN DRIVERS:Food prices, holidays and droughts were blamed for price increases, and economists agree inflation will make it difficult for China’s economy to remain strong


Customers check prices and goods as they shop in a supermarket in Huaibei, Anhui Province, China, yesterday.

Photo: AFP

Chinese inflation hit a seven-month high of 3.1 percent last month, data showed yesterday, with analysts warning further upward pressure on prices would restrict the government’s options to boost the economy.

The rise in the consumer price index (CPI), a main gauge of inflation in the world’s second-largest economy, was sharply up from the 2.6 percent logged in August, according to the National Bureau of Statistics (NBS).

It was also ahead of expectations of 2.9 percent in a poll by Dow Jones Newswires.

A spike in food prices was the main driver of the increase, and authorities blamed national holidays last month and early this month, along with floods and drought in some areas.

Cooling temperatures with the onset of autumn, rising traveling costs and a hike in fuel prices were also factors, NBS analyst Yu Qiumei (余秋梅) said in a statement.

In the first nine months of the year, the CPI was at 2.5 percent, the NBS said.

Last month’s figure was still below Beijing’s annual target of 3.5 percent for the year, but higher than the central bank’s benchmark one-year deposit rate of 3 percent, meaning savers’ bank deposits will lose purchasing power over time.

Economists warned that inflation was likely to pick up further in the rest of the year, leaving the government little leeway for policy easing.

“CPI inflation will be edging towards the cap at 3.5 percent and home prices are rising at annual rate about 9 percent,” analysts at Bank of America Merrill Lynch in Hong Kong said in a research note.

“We expect Premier Li [Keqiang] (李克強) will very likely ‘taper’ his pro-growth rhetoric and will gradually gear toward a more neutral stance,” they added.

China’s producer price index (PPI), which measures goods prices at the factory gate, rose 0.2 percent month-on-month last month, according to the NBS.

It edged up from 0.1 percent in August, which was the first increase in six months and came after five months of falling producer prices.

The PPI figure “shows that market demand is becoming more active and the macro economy is stabilizing and rebounding,” Yu said.

Yao Wei (姚煒), a Hong Kong-based economist with Societe Generale, said the improvement suggested some industrial producers had resumed, but cautioned that the development might not be sustainable.

“The question is how long it could last if the momentum of infrastructure investment were to be dampened by limited credit easing,” she said in a research note.

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