China inflation rises to 3.6 per cent in March

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Kuala Lumpur News.Net
Monday 9th April, 2012

BEIJING - As food prices remained volatile and fuel prices rose, China's consumer price index, a main gauge of inflation, scaled more than expected to 3.6 per cent in March from a year earlier, the National Bureau of Statistics said Monday.

The higher-than-expected inflation rate, up from the 3.2 per cent rate registered in February ( the lowest rate in 20 months), will delay monetary easing and dim the outlook for interest rate cuts, analysts say.

Economists are however optimistic that price pressures will moderate over the rest of year, giving Beijing the flexibility to ease monetary policy to support growth.

The nation's producer price index, a measure of average changes in prices received by producers for their output, dropped 0.3 per cent in March, marking the first monthly decline since December 2009. It has sparked concerns that the data is indicative of weakening demand.

Hike in fuel prices have also triggered a fresh wave of inflation concerns. In tandem with international trend, China last month lifted fuel prices for the second time in a year.

As a major driver of the growth, China's food prices, which account for nearly one-third of the weighting in the CPI calculation, increased 7.5 per cent last month from one year earlier.

Statistics from the Ministry of Commerce showed that the wholesale prices of 18 staple vegetables rose for four consecutive weeks from February, posting an increase of 9.7 per cent by early March, reported Xinhua news agency.

Tang Jianwei, senior analyst at the Bank of Communications, attributed the surge to inclement weather and held that the trend will be stemmed when the weather gradually warms up.

Citing vegetable prices in March, he emphasized that they are already showing signs of easing.

Prices of non-food items climbed 1.8 per cent year-on-year in February, up 0.2 per cent on a monthly basis.

Zhao Xijun, deputy dean of the School of Finance at Renmin University, said the price rises will gradually be reflected in the index when squeezed enterprises begin to pass on the cost to consumers.

He also warned about possible risks of imported inflation because of volatility in the international market, adding the biggest uncertainty lies in oil prices if the situation in the Middle East worsens.

Though oil price hikes have had only a minor impact on CPI growth as fuel only plays a small part in the calculation, the pass-on effect, particularly on freight has a pass on effect.

Even though uncertainties abound, analysts are largely optimistic that the government can meet its price control target of 4 per cent for the year, as the rounds of tightening policies earlier on will continue to wield influence.

The country's CPI climbed 3.8 per cent in the first quarter compared with the previous year.

China's inflation went beyond the government's full-year target of 4 percent last year, hitting 5.4 per cent, and only begun to show signs of easing this year as the government's efforts to hem in the runaway prices gradually worked.

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