China in­fla­tion fastest since mid-2014 as food prices jump

The Pak Banker - - MARKETS/SPORTS -

China's con­sumer price rose the most since mid-2014 in Fe­bru­ary as food costs jumped amid the week-long Lu­nar New Year hol­i­days, where mil­lions binge on roast pork, duck, seafood and veg­eta­bles.

The con­sumer-price in­dex rose 2.3 per­cent in Fe­bru­ary from a year ear­lier, up from 1.8 per­cent in Jan­uary, as food prices surged 7.3 per­cent. Rais­ing ques­tion marks over the dura­bil­ity of that pickup, non-food prices mod­er­ated from a month ear­lier to a 1 per­cent in­crease and ser­vices in­fla­tion slowed.

The pro­ducer-price in­dex fell 4.9 per­cent, nar­row­ing from a 5.3 per­cent de­crease in Jan­uary, ex­tend­ing de­clines to a record 48 months.

Sta­bi­liza­tion in prices, if sus­tained in com­ing months, will ease pol­icy mak­ers' con­cerns over de­fla­tion, which dis­cour­ages new in­vest­ment and erodes profit mar­gins.

Still, CPI re­mains well below the govern­ment's tar­get for 3 per­cent this year, mean­ing there's no con­straint yet on pol­icy mak­ers' scope for eas­ier mon­e­tary set­tings.

"Food prices surged be­fore the Spring Fes­ti­val and a cold wave pushed them higher," said Zhao Yang, Chief China econ­o­mist at No­mura Hold­ings Inc. in Hong Kong. "The jump is tem­po­rary. In­fla­tion is un­likely to be­come a con­cern that would limit mon­e­tary pol­icy."

Zhao said he sees in­fla­tion mod­er­at­ing again in com­ing months, while there is some risk that rents will rise in the na­tion's big­gest cities as prop­erty prices re­cover.

Min­ing and raw ma­te­ri­als prices re­mained the big­gest drag on fac­tory prices.

China's in­fla­tion re­bound com­pares with a sub­dued pic­ture in some of the world's other large economies. In Ja­pan, the cen­tral bank's key price gauge didn't move in Jan­uary, hov­er­ing around zero com­pared with a2 per­cent in­fla­tion goal.

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