China Inflation, Factory Output Exceed Forecasts, Add Tightening Pressure

The Chinese government has set a target of 4% inflation for this year. Statistics from February, though, reveal that inflation has already exceeded this target.  From Bloomberg News:

Consumer prices rose at an annual 4.9 percent pace in February and output increased 14 percent in the first two months of 2011, the statistics bureau said in Beijing. Producer prices jumped 7.2 percent last month, the most since September 2008.

Today’s reports signaled the central bank’s monetary tightening has been insufficient so far to contain prices, in an echo of pressures across Asia that spurred South Korea, Thailand and Vietnam to raise interest rates this week. People’s Bank of China Governor Zhou Xiaochuan said today interest rates will be used to curb inflation, and played down the role of currency gains, which U.S. officials have encouraged China to use.

Wen, who will close the annual meeting of the National People’s Congress with a press conference on March 14, has set reining in inflation as the nation’s top economic priority this year. On March 5, he told the lawmakers that price gains, including “exorbitant” increases in house costs in some cities, have the potential to undermine social stability.

However, some analysts are interpreting these statistics in a more positive light, believing that it shows inflation is steadying. From BBC:

Consumer prices rose 4.9% from a year earlier, the same rate as in January, the National Bureau of Statistics said.

Analysts had forecast a figure nearer 4.7%, but said it was more significant that the rate of growth had steadied.

They said it may show that China was managing to rein in inflation without hurting economic growth.

However, they added that it was too early to say for certain that the inflationary trend had broken, and that they expected the government and central back to keep taking measures to contain price growth.

March 11, 2011 4:07 PM
Posted By:
Categories: Economy, Society