China’s January CPI expected to rise 6.5 percent
Despite heavy snow in most parts of southern China, the country’s consumer prices index may grow 6.5 percent year on year in January, roughly the same as the December, Chen Xiwen, head of the Office of the Central Leading Group on Rural Work, said on Thursday at a State Council press conference.
“The storms have had a severe impact on agricultural production, mostly in the south. The impact on fresh vegetables was catastrophic in certain areas,” he told reporters.
“But considering most of the winter grain crops are grown in the north, the supply of grain, pork and edible oil nationwide largely remains intact,” said Chen, who added oil crops in the middle and lower reaches of the Yangtze River were “seriously” affected.
“As for the impact on the whole year’s grain production, we still have to wait and see. We are not sure how long the storms would last or whether it would move to the north,” he said.
“If the storms get worse or expand, China’s agricultural production will be affected seriously.”
China’s consumer price index (CPI) rose 4.8 percent in 2007, with food prices, especially pork, as the major cause of the increase. CPI figures are routinely released by the National Bureau of Statistics.
“Compared with the grain price in the global market, that in the Chinese market rose within a reasonable range in 2007,” said Chen.
Experts predicted the CPI could rise about seven percent year-on-year in January.
Zhuang Jian, senior economist with the Asian Development Bank mission in China, said the storms had a short-term impact on transportation and farm production, which might push up CPI in the first quarter in 2008 to 6.5 percent.
“In the long run, however, the impact on inflation is quite trivial,” he added.
Deutsche Bank chief economist in China, Ma Jun, said the recent soaring price of farm produce would send inflation up to seven percent or so in January, posing the biggest domestic macroeconomic risk in the short term.
Other risks China faces, according to Ma, include the impact of the U.S. economic slide on China’s employment in export industries and possible too big correction in the A-share stock market after the Olympics.
Ma forecast the gross domestic product this year would rise 10.4 percent, slightly lower than the 2007 figure of 11.5 percent.
“The shopping spree in the coming Spring Festival, rising transportation costs due to the storm and a relatively low CPI figure in January last year is likely to nudge inflation this month up to around seven percent,” said macroeconomic analyst Lin Songli of the Guangzhou-based Guosen Securities.
Tags: CPI, inflation