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China Inflation Rebounds Beyond Expectations


Inflation in China increased more than expected in March after easing to a twenty-month low in February, data from the National Bureau of Statistics showed Monday. The latest rise in inflation rate was mainly driven by rising food costs.

Inflation rose to 3.6 percent in March from 3.2 percent in February. Economists had forecast an increase to 3.4 percent. Food inflation accelerated to 7.5 percent from 6.2 percent in the previous month, partly led by a 6.1 percent annual surge in costs of fresh vegetables.

Last month, Premier Wen Jiabao set an inflation target of 4 percent for 2012, the same as that of 2011. Inflation exceeded the target every month last year due to higher food prices.

The government hiked fuel prices for the second time in less than six weeks in March amid mounting pressure from the country's refineries to respond to the rising international crude prices. This might have added to inflationary pressures with China being the second-largest oil consumer after the U.S.

The price index for transportation and communications rose to 0.3 percent, recovering from February's 0.4 percent fall. Utility costs advanced 2.6 percent year-on-year in March.

The statistical office also noted that the house prices increased 2 percent from the previous year. Wen had pledged to continue property market curbs to rein in prices, which, according to him, are still far from "reasonable levels."

In February, the People's Bank of China decided to cut the banks' reserve requirement rate by 50 basis points for the second time in three months to boost growth, but refrained from an interest rate reduction fearing inflation surge from possible spike in global fuel prices.

Separately, the statistical office said that the producer price index fell 0.3 percent from March 2011. The outcome was in line with expectations and followed a flat reading in February. Prices have been falling steadily since July last year.

The government targets 7.5 percent growth for the economy this year, lower than the previous target of 8 percent. The economic growth slowed to 9.2 percent in 2011 from 10.4 percent in 2010.

by RTTNews Staff Writer

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