China’s inflation rebounded more than forecast to a 10-month high last month, approaching the government’s target as a week-long holiday helped boost prices.
The consumer price index (CPI) rose 3.2 percent last month from a year earlier, the Chinese National Bureau of Statistics said yesterday.
That compares with the 3 percent median estimate in a Bloomberg News survey of 35 economists and a 2 percent gain in January.
Data in the first two months of the year are distorted by the Lunar New Year holiday.
A sustained pickup in inflation would boost the case for monetary tightening after the nation’s new leadership team cements its succession next week at the annual meeting of the National People’s Congress in Beijing.
Outgoing Premier Wen Jiabao (溫家寶) said this week that China is under “considerable inflationary pressure” from land and labor costs and developed countries’ easing.
“Inflation is a policy risk looming large on the horizon,” Liu Li-gang (劉利剛), chief Greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong, said in a note yesterday.
Rising wages, environmental costs and economic growth will contribute toward higher prices, Liu said.
Producer prices fell 1.6 percent from a year earlier, the 12th straight decline and the same as January’s drop. That compares with the median estimate for a 1.5 percent fall in a Bloomberg survey of 32 economists.
The CPI rose a combined 2.6 percent in January and last month from a year earlier, compared with a 3.9 percent gain in the first two months of last year.
Out of 24 economists surveyed by Bloomberg News last month, 10 forecast an interest-rate increase by the end of the year.
Consumer price gains may moderate this month as the impact of the holiday fades and better weather boosts production of agricultural products including vegetables, the statistics bureau said in a separate statement on its Web site explaining seasonal forces that affected the data.
China set an inflation goal of 3.5 percent for this year, Wen said in his final annual report to the congress on Tuesday, lowering the target from last year’s 4 percent.
Analysts surveyed by Bloomberg expect a pickup to 3.1 percent this year.
The nation may need to raise interest rates should CPI gains stay at more than 3.5 percent for three months, Chen Dongqi (陳東琪), a senior researcher affiliated with China’s top planning agency, said on Thursday.
Consumer inflation will slow to below 2.5 percent this month, then gradually accelerate to “stay consistently above” 3 percent after the middle of this year, said Zhu Haibin (朱海濱), chief China economist at JPMorgan Chase & Co in Hong Kong.
The central bank’s monetary policy will probably be biased toward tightening, Zhu said.
Food prices jumped 6 percent last month from a year earlier, slower than the comparable 10.5 percent rise in January last year
Factory output in the first two months of the year probably rose 10.6 percent from a year earlier, up from a 10.3 percent pace in December last year, according to a Bloomberg survey.
China’s economic growth accelerated to 7.9 percent in the final three months of last year from a year earlier. The pace may pick up to 8.2 percent in the three months through this month, according to the median estimate of 23 economists surveyed by Bloomberg News last month.
“Policy makers should be wary of inflation later this year” with the recovery in economic growth, Lu Ting (陸挺), head of Greater China economics at Bank of America Corp in Hong Kong, said in a note yesterday.
At the same time, “it’s too early to call for significant monetary tightening at present,” he said.