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March 20, 2012

 

China's CPI rises 3.2% on-year

 

 

According to the latest data released by the National Bureau of Statistics (NBS) on March 9, in February, the Consumer Price Index (CPI) of China showed a 3.2% on-year growth, the lowest level in the last 20 months.

 

The statistics show that food prices reported a 6.2% increase in February, contributing 1.99% to CPI growth in the month. Still, food prices saw 0.3% decrease on-month.

 

National prices of China's mainstay meat, pork, have seen a continuous decrease for more than a month, according to data monitored by Xinhua. On March 5, national prices of pork haunch and pork belly respectively dropped 8.2% and 8.9% from January 26. Meanwhile, egg prices in February decreased 8.1% from the previous month and 8.3% from the same period of last year, according to the NBS.

 

China's demand showed obvious weakening in February due to seasonal reasons, despite the disruptions of heavy snow and other bad weathers in some areas, says Lian Ping, chief economist with Bank of Communications.

 

The fact that the lunar New Year festival fell in January this year also helped ease the inflation pressures in February, according to Liu Yuanchun, vice-director of the School of Economics of Renmin University. The 4.9% CPI growth in February 2011 also provided a high base for February 2012.

 

Chinese monthly CPI data will see a continuous on-year decrease within the first nine months of 2012 and the last quarter will witness acceleration in growth of the CPI compared with the same period of 2011, says Lian Ping.

 

The Chinese central government has announced its aim to control CPI growth at about 4% in 2012, taking in account imported inflation, increasing factor costs, and the need to maintain economic growth momentum.

 

CPI growth will see a continuous decrease in the first three quarters of 2012 and China is probably going to meet its goal of annual CPI growth control, according to experts.

 

In the first two months of 2012, China's CPI growth stood at 3.9%, which is already less than 4%.

 

China has sufficient grain stocks upon consecutive eight years of good reaping and international grain prices are expected to go down this year, which will secure enough supply.

 

The supply of pork is expected to go up due to new arrivals and pork prices would see correction this year on narrowed gap of supply and demand.

 

The government also will take measures to secure supply of agricultural produce, reduce transportation costs and strengthen regulation.

 

However, China will see substantial inflation pressure in 2012, though most institutions expect China's CPI growth in this year will be less than 3.5%.

 

Plus, China is still facing a wage/price spiral in the medium term and this has implications for price levels and national economy, according to Liu Yuanchun.

 

The latest CPI growth rate of 3.2% in February falls short of the 3.5% one-year benchmark time deposit interest rate.

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