Inflation hits confidence index

08:21, February 24, 2011      

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Chinese consumer confidence fell in the last quarter of 2010 to the lowest level since 2009 as people became increasingly concerned about rising inflation.

The confidence index, compiled by the National Bureau of Statistics' China Economic Monitoring and Analysis Center and the Nielsen Company, was at 100, down from 104 three months ago and 109 in the second quarter of last year, according to the survey released yesterday.

People in rural areas, however, were more confident with a reading of 107 but residents in urban areas showed less confidence as the reading fell to as low as 95 in first-tier cities because of surging consumer prices, particularly food costs, the survey said.

People in rural areas were more optimistic because of less concerns over job prospects and personal finances, and farmers were also less affected by rising food prices, the survey said. People were also less willing to spend because of high housing prices and government's tightening monetary policies.

Pan Jiancheng, deputy director general at the center, said the drop in confidence seemed to be more "psychological".

"Domestic consumption did not slow in recent months," Pan said. "Robust spending in during the Spring Festival holiday indicated people's confidence fell due mostly to worries for the future, and has not affected their spending behavior."

China's retail sales, a yardstick measuring people's demand and expenditure, grew 18.4 percent from a year earlier in 2010, faster than the pace of 15.5 percent in 2009.

But inflationary pressure continued to accumulate. The Consumer Price Index, the main gauge of inflation, rose 4.9 percent annually in January, up 0.3 percentage point from December's and surpassing the government target of 4 percent for the fourth consecutive month.

Big banks have to put aside a record 19.5 percent in reserve requirement ratio, and some analysts see it at 23 percent by year's end.

Source: Shanghai Daily
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