Food price hikes push CPI to 8.7%
http://www.soufun.com/news/2008-03-12/1571268.htm
2008年03月12日09:28 China Daily
The consumer price index (CPI) - a key gauge of inflation - rose to 8.7 percent in February, the highest since June 1996, adding pressure on policymakers battling to curb inflation.
It was a sharp 1.6 percentage point gain from January, Xie Fuzhan, head of the National Bureau of Statistics (NBS), told reporters yesterday.
Severe snowstorms which hit parts of central and southern China in January and February disrupted transportation and
food supplies, especially vegetables, whose prices surged by 46 percent year-on-year in February compared with 13.7 percent in January.
The February CPI was driven primarily by food and housing-related prices, which increased by 23.3 percent and 6.6 percent year-on-year, according to the NBS. In January, the figures were 18.2 percent and 6.1 percent.
The rapid growth in food prices was also because of brisk consumption during the Spring Festival holiday - which started February 6 - and the inclement weather.
The hike in housing-related prices was a result of rising costs of rent, utilities and construction materials, said Sun Mingchun, economist with the Lehman Brothers.
Despite the temporary effect of the adverse weather, analysts warned that inflationary pressure would remain in the coming months. Many economists are still not convinced that the February figure would be the peak of the current inflation cycle.
"Although the figures in the coming months are likely to be better, the pressure will continue," said Zhu Baoliang, senior economist at the State Information Center.
Even after the weather-related impact fades, the economy still faces many uncertainties that may continue to push up prices, he said.
"While food prices are set to ease, labor costs and international oil, metal and grain prices may all continue to rise, which may spill over into other sectors of the economy," he said.
The NBS said international oil prices have risen by more than 7 percent this year, and metals and agricultural products by 30-40 percent. "The import-induced impact (on price rises) from the international market is increasing," Xie said.
"The ample money in the market is also a major factor pushing up prices," said Song Guoqing, senior economist with Peking University's China Center for Economic Research.
China's foreign exchange reserves were up to $1.53 trillion by the end of 2007. In January, foreign direct investment surged to $11.2 billion, up by 110 percent year-on-year.
Buoyed by plentiful liquidity, the CPI may hover above an average 7 percent in the remaining months of the first half, Song warned.
Lehman Brothers marked up its forecast of China's CPI this year to 5.5 percent from the previous 4.4 percent. Morgan Stanley Asia's chief economist Wang Qing said that although CPI may peak in February for this year and ease to below 5 percent in the second half, the whole-year reading would nevertheless be about 6.5 percent.
Both forecasts are above the 4.8 percent target set by the government.
Analysts expect a series of tightening measures to help keep inflation in check including an interest rate hike.
"An interest rate hike is certainly necessary," Song said..
