China Watch Blog has learnt that China’s inflation rate in March rebounded more than expected due to higher food costs, with the Consumer Price Index (CPI), the main gauge of inflation, rising 3.6 percent from a year earlier last month.
Food prices increase pushing up inflation
According to the National Bureau of Statistics, CPI was up from February’s 3.2 percent and more than the previous market expectation of 3.5 percent and food costs increased 7.5 percent year on year, compared with 6.2 percent in February.
According to the National Bureau of Statistics, its is trickier for the world’s second-largest economy to add growth-supportive measures.
Li Maoyu, an analyst at Changjiang Securities Co, was quoted as saying in a Shanghai Daily report that, “Such a rate may invite policymakers to be more cautious of any moves to stimulate the economy.”
Li said recent signals of consumer goods experiencing a new round of price increases triggered inflationary expectations again.
Last month, China raised the retail prices for gasoline and diesel by a larger-than-expected margin, and planned to introduce a graduated power tariff system. Afterwards, there were reports of higher prices of milk powder, cooking oil, fast food and shampoo, while producers cited more expensive raw materials and labor costs for their price jumps.
Cheng Siwei, a renowned economist and former vice chairman of China’s top legislature, said last week in Shanghai that the country should remain alert to inflation because speculative money tended to flow into the real goods market and bolster consumer prices when both housing and stock markets were weak.
Some other analysts were optimistic.
Lian Ping, chief economist at Bank of Communications, said inflation was still controllable and the country requires more measures to boost growth.
“Despite a rebound, it was the second month for the inflation rate to fall below the government target of 4 percent,” Lian said. “Considering the economic growth which may ease further, the country should cut the reserve requirement ratio at least once to stimulate the economy.”
China is to unveil the first-quarter gross domestic product growth on Friday, and economists estimated it will moderate to around 8.5 percent, down from 8.9 percent in the final quarter of 2011.
Deflating producer prices were another sign to dismiss inflationary pressure.
The Producer Price Index, a factory-gate measurement of inflation, lost 0.3 percent on an annual basis in March, the lowest since December, 2009.
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