China revises CPI weighings, inflation on the move

08:57, February 16, 2011      

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A child eats on a street in Beijing Tuesday. China says inflation shifted slightly in January but remained stubbornly high at 4.9 percent. Photo: AFP

January's lower-than-expected consumer price index (CPI) reading may help ease price woes in the market for the time being, but analysts say it is still a strong sign that China remains on the brink of serious inflation.

As a result, they say, more tightening measures are on the horizon.

CPI, a major gauge of inflation, grew 4.9 percent year-on-year in January, 0.3 percent higher than in December, the National Bureau of Statistics (NBS) said Tuesday.

The January data was based on the bureau's new, revised calculation of the CPI basket. The weighting of food was cut from 32.4 to 30.2 percent, while the housing weight was increased from 15 to 19.2 percent.

The bureau insisted in an online statement that the new method will serve only to improve the accuracy of calculations, dismissing speculations that new weighting was meant to artificially lower the CPI figure.

Some analysts called the new results into question, claiming that the figures had been pulled down by 0.3 percent under the new calculations.

However, the bureau said the re-weighting actually raised the year-on-year CPI inflation in January by 0.024 percent. However, it conceded that the re-weighting actually lowered the month-on-month CPI inflation by 0.049 percent.

"The bureau didn't reveal details of adjustments to weights of concrete food items," noted Wang Tao, chief economist with USSecurities China. "The weaker-than-expected reading will help ease market concerns."

The bureau also said more than 13,000 monitoring stations have been added at grocery stores and supermarkets to collect data - bringing the nation's total such stations to 63,000.

Chang Jian, an economist with Barclays Capital, said food inflation seemed to have been overestimated.

"We estimated that the CPI would grow by up to 5.3 percent, mainly driven by a projected 11.6 percent surge in food prices," Chang told the Global Times.

The official figure showed that food prices increased 10.3 percent year-on-year in January.

Commenting on the January figures, Lu Ting, an economist with Bank of America-Merrill Lynch, said, "The market could respond positively to the news, as the below-consensus CPI reading was mainly driven by a smaller-than-expected increase in food prices instead of the re-weighting."

By Li Qiaoyi and Huang Jingjing, Global Times

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