China's inflation rises modestly, pressure remains

20:44, February 11, 2010      

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China's consumer price index (CPI), a indicator of inflation, rose 1.5 percent year on year in January this year, the National Bureau of Statistics (NBS) announced Thursday.

"This is a modest rise and it is mainly caused by a hike in food prices," Fan Jianping, a senior economist with the State Information Center, told Xinhua Thursday.

Food prices went up 3.7 percent last month year on year, with non-food prices edging up 0.5 percent from a year earlier.

The index in January was up 0.6 percent from December, with food prices up 1.8 percent from the previous month, said the NBS.

China's inflation has continued to rise since November, pushed up by a rise in food prices caused by the bleak winter conditions in early January, said Xiong Peng, a senior researcher with the Shanghai-based Bank of Communications (BOC), China's fifth largest lender, Thursday.

Figures showed that China's CPI rose 1.9 percent year on year in December last year.

"The year-on-year CPI growth rate did not increase from December. This is the result of a relatively high comparison basis in January 2009, as Spring Festival and annual shopping spree fell in that month," Xiong explained.

The producer price index (PPI), an inflation indicator at the wholesale level, rose 4.3 percent in January from a year earlier, increasing from 1.7 percent in December 2009 when the figure ended 12 months of decline.

Analysts said the domestic price reform of major resource products and rising international commodity prices accelerated the PPI growth.

In breakdown, the price of crude oil surged 70 percent, and that of raw coal was up 5.3 percent. Non-ferrous metal price rose by a quarter.

A relatively lower comparison basis in January 2009 also helped push up the PPI last month, according to a Thursday BOC research report.

"China's CPI and PPI are on track for continuing growth on the back of economic expansion. Improving exports may also boost domestic manufacturing demand in the first quarter of this year," Xiong said.

China's exports grew 21 percent in January as the global economy gradually began to recover, customs data showed on Wednesday.

Possible bad winter weather, Spring Festival and rising accommodation costs in cities may further cause the CPI to rise, according to the BOC report.

China Construction Bank predicted Wednesday that China's CPI may climb to 3 percent in 2010 year on year.

This is in line with BOC's forecast. It predicted that China's CPI would rise between 3 and 4 percent for 2010, with PPI in the range of 4 to 4.5 percent.

"The government should closely monitor the inflation indicators, especially the rise of the PPI," Fan said.

The Chinese government should introduce a series of macro-management measures to keep the inflation rate stable, Xiong added.

Thursday figures showed that China's new yuan-denominated lending in January stood at 1.39 trillion yuan (203.5 billion U.S. dollars), down 14.2 percent from a year earlier, dampening market expectations of an interest rate raise in the near future.

Chinese equities closed higher in the morning session of Thursday after releasing the latest economic figures, with the benchmark of the Shanghai Composite Index gaining 0.16 percent, or 4.67 points, to 2,987.17 points.

Source: Xinhua
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