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China Pork Prices Higher in January

by 5m Editor
9 February 2012, at 7:21am

CHINA - Prices of pork, China's staple meat, soared 25 per cent year-on-year in January.

China's consumer price index (CPI), a main gauge of inflation, rose 4.5 per cent year-on-year in January, the National Bureau of Statistics said Thursday.

The growth rate was the highest in three months, accelerating from 4.1 per cent in December and 4.2 per cent in November. On a monthly basis, the country's CPI increased 1.5 per cent in January, the NBS said.

Although the unexpected rebound severed a months-long decline from a 37-month high of 6.5 per cent in July, it will not change the CPI's downward trend for the whole year, analysts said.

The CPI increase, which was mainly boosted by food price surges in January amid the traditional Chinese Lunar New Year holiday, will see a remarkable pull-back in February, said Lian Ping, chief economist at the Bank of Communications.

Li Huiyong, chief analyst of Shenyin & Wanguo Securities, expected the country's CPI annual increase to ease to 3 to 3.5 per cent in February.

Food prices, which account for nearly one third of the basket of goods in the nation's CPI calculation, climbed 10.5 per cent in January from one year earlier and contributed to 3.29 per centage points in January's CPI rise.

Prices of pork, China's staple meat, soared 25 per cent year-on-year in January, while grain prices jumped 6.1 per cent from one year earlier.

On a monthly basis, the country's CPI increased 1.5 per cent in January, the NBS said.

Despite the CPI rebound, the country's producer price index (PPI) only increased 0.7 per cent in January year-on-year, down from 1.7 per cent in December and was the lowest since December 2009. PPI is a main gauge of inflation at the wholesale level.

However, even if January's rebound was an aberration, the fact that it was well above the market expectations may caution policy makers to hold off policy loosening, said Peng Wensheng, chief economist of the China International Capital Corporation, the country's largest investment bank.

"There is less possibility that the central bank will cut the reserve requirement ratio in February," Mr Wensheng said.

For more than a year, China has been squeezing its banking system in efforts to rein in high inflation. However, the country's central bank in December cut the amount of cash that lenders have to set aside as reserves for the first time in three years..

"Inflation is a decreasing risk for the economy and policy is likely to emphasize growth in the medium term," Alaistair Chan, an economist at Moody's Analytics said in a statement.

The country's policy makers vowed to maintain the prudent monetary policy and proactive fiscal policy in 2012, but fine-tune these policies as conditions change.

China's economic growth had slowed over the length of last year. Its GDP growth decreased to 8.9 per cent in the fourth quarter of 2011 from 9.7 per cent in the first quarter.

The country's GDP growth will further dip to 8.5 per cent in the first quarter of this year, the State Information Center, a government think tank, projected in a statement released Thursday.

On Monday, the International Monetary Fund cut its forecast for China's GDP growth this year to 8.25 per cent from the 9 per cent projected in September 2011. It said China's projected growth could be cut by nearly half if the eurozone, its biggest trade partner, suffers a sharp downturn due to the debt problems.

China's Producer Price Index (PPI), a main gauge of inflation at the wholesale level, rose 0.7 per cent in January year-on-year, the lowest since December 2009, the National Bureau of Statistics (NBS) said Thursday.

The reading eased further from December's 1.7-per cent growth, as most of the country's factories suspended production during the Chinese Lunar New Year holiday.

On a month-on-month basis, China's January PPI fell 0.1 per cent from December, the NBS said in a statement on its website.

Producer purchase prices grew 2 per cent year-on-year in January and were down 0.3 per cent from a month ago, said the NBS.

Economist Dong Xianan said the January PPI growth was in line with expectations and the growth would continue to decelerate in February.

"With the further easing of inflationary pressures, the growth in the country's producer prices may pick up in the second half of this year if demand improves," he said.