April 10, 2012

 

China's commodities price hikes will not affect inflation

 

 

A new round of price hikes announced recently in China by major makers of cooking oil, milk powder and shampoo will not have a big impact on local consumer inflation for several months to come, several economists said.

 

"The increases will put pressure on prices in the second half of the year," said Wang Xiaru, an economics analyst at Changjiang Securities.

 

The National Bureau of Statistics is due to release March consumer price data today. Analysts see inflation at 3.5% last month, up slightly from 3.2% in February.

 

The higher prices for daily necessities announced in March won't show up in the official data until the second half of the year, economists said.

 

In late March, cooking oil producers Arawana and Fulinmen raised retail prices on peanut and canola oils by an average 8%. Powdered milk companies Nestle and Mead Johnson said they will raise prices by about 10% this month. And Procter & Gamble said prices of its Head & Shoulders and Vidal Sassoon brands of shampoo rose between 10% and 20% from April 1.

 

Wang said the effect of new price hikes won't be reflected in the consumer price index until September, peaking in the run-up to the Mid-Autumn Festival and National Day holidays.

 

Li Wei, an economist at Standard Chartered, said: "Daily necessities go up in price every year. China's economic slowdown will help ease pressure on prices."

 

Arawana and Fulinmen said they were raising prices of cooking oil because of rapidly rising peanut costs and higher transport costs after the government increased gasoline prices to a record last month.

 

The price of peanuts rose 55% to RMB14,000 (US$2,219) a tonne after the Chinese New Year in late January, an Arawana spokesman was quoted as saying in Qingdao-based Peninsula Metropolis.

 

"Inflation pressure for the second quarter is going to be small," said Li Xunlei, chief economist with Guotai Jun'an Securities.

 

Food prices have been a key focus of inflation watchers because they are keenly felt by ordinary people in China, who spend about a third of their disposable income on food. In February, the food price component of the CPI rose 6.2%.