MW: China’s consumer prices rise less than expected
HONG KONG (MarketWatch) — China’s consumer inflation rose more slowly than expected in January, even with a reweighting of the index, but wholesale prices outpaced forecasts, according to data released Tuesday.
China’s consumer price index rose 4.9% in January from a year earlier, the National Bureau of Statistics said, with the result matching a figure leaked on Monday, but still below an average forecast of 5.4% from a survey of economists reported by Dow Jones Newswires.
However, the producer price index measuring wholesale inflation rose a faster-than-expected 6.6%. The consensus from the Dow Jones survey Average had tipped a 6.3% rise.
In December, consumer prices rose 4.6% year-on-year, while wholesale prices were up 5.9%.
Chinese authorities face a difficult job wrestling inflation back to its target level, analysts say, with consumer prices likely up heat up further before cooling in the second half of the year as the impact of policy tightening takes effect.
And even for the end of the year, the CPI — which should nudge 6% in coming months — may not soften all that much, especially in the event of weather-related crop failures, according to RBC analyst Brian Jackson.
“The risk is that inflation will stay stronger for longer, particularly if serious drought conditions in the north of the country persist or worsen,” Jackson said in a note.
Reweighting
The bureau also unveiled changes in the way it calculates the consumer price index, increasing the weighing of property, which it said added slightly to the January inflation figure.
It said it recalculated the gauge of consumer outlays to reduce the weighting of food to 30.2%, down from 32.4% previously, while housing was increased to 19.2% from 15%.
“Contrary to what the market had speculated, the reweighting actually raised the year-on-year CPI,” said BofA Merrill Lynch analyst Ting Lu in Hong Kong.
The Statistics Bureau said the change had added 0.024 percentage point to January’s CPI.
The Merrill analyst said the 10.6% in food prices for the month was also below consensus expectations, and that “the implication here is that inflation pressure might be smaller than the market had thought.”
Lu also said the CPI would likely ease moderately in February, though not enough to forestall further interest-rate hikes, which could come in April. He said increases to banks’ reserve ratio requirements were possible as early as next month.
