GO
Loading...

China Feb Inflation Leaps to 11-Year High

Reuters
Monday, 10 Mar 2008 | 11:03 PM ET

China's consumer inflation jumped in February to an 11-year high of 8.7 percent, presenting Beijing's stability-conscious leaders with a big economic headache in the run-up to the Olympic Games.

Inflation in January was 7.1 percent, and economists had expected a February figure of 8.0 percent.

The National Bureau of Statistics blamed the surprising increase largely on fierce winter weather and seasonal price rises due to the Lunar New Year holiday, which helped boost food prices by 23.2 percent in February from a year earlier.

The annual rate of non-food inflation remained tame at 1.6 percent, up just a touch from 1.5 percent in January.

Stripping out food and energy, the core inflation rate was 1.0 percent in February, in line with the trend seen since the second half of 2007, the bureau said.

Still, economists said the surge in the headline rate to the highest level since May 1996 would reinforce popular fears of ever-rising prices and make it more difficult for the central bank to reverse inflationary expectations.

"It's true that both the severe winter and Lunar New Year had an impact on the increase, but after so many months of big rises I'm afraid now the risks are high that China will see more broad-based inflation," said Chen Jijun, an analyst at CITIC Securities in Beijing.

"Though non-food inflation is only 1.6 percent, it has been accelerating. I think the possibility for price rises to spread from food to other sectors is growing," he added.

Economists said the figures shortened the odds that the central bank would raise interest rates for the first time this year. Bank deposit rates now yield less than half the inflation rate.

The Shanghai stock market fell in response to the report as investors prices in higher rates. The main index was down 1.17 percent in mid-morning.