China’s inflation accelerated last month and housing prices rose at a record pace, but analysts said Beijing was likely to avoid an immediate interest hike that might slow the recovery of the world’s third-largest economy.
Consumer prices last month rose 2.8 percent from a year earlier, below the official full-year target of 3 percent but up 0.4 percentage points from March, the National Bureau of Statistics said yesterday.
Food prices jumped 5.9 percent, up from March’s 5.2 percent rate.
PHOTO: REUTERS
“Growth in the consumer price index is still mild compared with our economic recovery and inflation in other countries,” bureau spokesman Sheng Laiyun (盛來運) said. “But we are facing big inflation pressures in the short term.”
Foreign companies and investors are watching Chinese inflation because any government moves to cool prices might slow economic growth. That could hurt the global recovery if it weakens demand for iron ore and other imports.
“Overall, we don’t see this as threatening yet for the economy,” Standard Chartered economist Jinny Yan said.
She said inflation was likely to rise further, possibly hitting a peak of 4 percent in June, but Beijing was unlikely to hike rates while the global outlook was uncertain amid Europe’s debt crisis.
“Recent events should rule out an imminent rate hike,” she said. “What they will do is observe external markets for a while longer before deciding what to do.”
China’s economic growth accelerated to 11.9 percent in the first quarter, driven by Beijing’s 4 trillion yuan (US$586 billion) stimulus.
The government worries about a surge in housing and other asset prices and is trying to use lending curbs to prevent a dangerous bubble while avoiding an across-the-board rate hike that might slow growth.
Despite those controls, the statistics bureau said yesterday that housing costs in 70 Chinese cities rose by a record 12.8 percent last month from a year earlier. Analysts said it could take several months for the effect of government controls to show.
Also last month, lending by Chinese banks rose to 774 billion yuan, from March’s 510.7 billion yuan, the central bank reported yesterday.
Wholesale prices climbed 6.8 percent last month from a year earlier and 0.9 percent from March. That could lead to higher consumer prices down the line as retailers pass on higher costs.
Other data released yesterday showed China’s economic recovery was on track.
Last month’s retail sales increased 18.5 percent from a year earlier and 0.5 percent from March’s growth rate, while industrial output rose 18.8 percent. Investment in factories and other fixed assets rose 26.1 percent in the January-to-April period over a year earlier.
“High growth and low inflation in the first half of the year looks set to segue rapidly into lower growth and higher inflation in the second half,” Tom Orlik, an analyst in Beijing for Stone McCarthy Research Associates, said in a report.
“But there is little in today’s data release to force a change in the government’s policy agenda,” Orlik said.
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