Costlier food boosts Chinese inflation

Now Reading:

Costlier food boosts Chinese inflation

Text size Aa Aa

China’s inflation rate spiked in January after having fallen for the previous five months.

It was up by 4.5 percent from January last year due to a jump in spending during the Chinese Lunar New Year holiday season.

Food prices, which make up a third of China’s consumer price index, surged 10.5 percent from a year earlier.

The figures mean economic stimulus measures by Beijing are less likely.

The size of the seasonal distortion makes the January data particularly hard to read, but economists say it is likely to have squeezed out any remaining expectation of a near-term cut to the amounts of money that banks have to keep in reserve.

That had been confidently predicted in the run-up to Lunar New Year but failed to materialise.

Few economists believe the central bank will cut outright lending rates this year while annual inflation stays stubbornly high.

A cut could prompt Chinese to divert their bank savings into more speculative investments, such as the stock market.

The distorting impact of the Lunar New Year has led the government to delay the release of factory output, investment and retail sales data for January. It will combine them with February numbers published in March to smooth out the impact.