CPI rise defies expectations as higher food costs bite - ResearchInChina

CPI rise defies expectations as higher food costs bite

   Date:2012-04-10

China's inflation rate rebounded more than expected in March due to higher food costs, making it trickier for the world's second-largest economy to add growth-supportive measures.

The Consumer Price Index, the main gauge of inflation, rose 3.6 percent from a year earlier last month, the National Bureau of Statistics said today.

It was up from February's 3.2 percent and more than the previous market expectation of 3.5 percent.

Food costs increased 7.5 percent year on year, compared with 6.2 percent in February.

"The inflation rebound is stronger than expected," said Li Maoyu, an analyst at Changjiang Securities Co. "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.

Source:chinesestock

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