China’s inflation accelerated to 4.5% in January 20129 February, 2012, 13:21. Posted by Zarathustra
Tags: CPI, Economy, Inflation
China’s consumer prices inflation unexpectedly accelerated in January. The headline inflation increased from 4.1% yoy in December to 4.5% yoy in January while the consensus expected a fall to 4.0%. However, for the month of Chinese New Year, I suppose we should have been expecting prices to remain relatively sticky, if not downright increasing. And in fact, on a month-on-month basis, consumer prices increased by 1.5%, which is the highest month-on-month increase since the data became available.
Looking at the individual components, food remains the main driver for increase in prices, as food prices increased by 10.5% yoy in January, picking up from 9.1% in December. In particular, prices for vegetables increased by 23.0% yoy for January. The prices changes for other components, in contrast, remain relatively stable. Non-food prices increased by 1.8% yoy for January.
Source: National Bureau of Statistics
While this report is a surprise on the upside, I would continue to expect inflation to decelerate in the coming months as the effect of Chinese New Year fades, and there should not be much of an inflationary pressure in the long term, in my view, due to board-based over-investment and the resulting over-capacity within the economy.