BEIJING: Chinese inflation was lower than forecast at 4.9 percent in the year to January, but price pressures are building and will force the central bank to stick to its course of gradual monetary tightening, according to Reuters on Tuesday, Feb 15.
In a tentative sign that its actions, from higher interest rates to tighter resrictions on bank lending, have started to bite, money growth eased to its slowest pace in six months in January at 17.2 percent year on year.
"The money supply and lending data suggest that government efforts to clamp down on liquidity might be taking hold, though broad-based inflation provides no leeway for the central bank to relax its tightening stance," said Connie Tse, economist at Forecast PTE in Singapore.
January's inflation was below the median forecast in a Reuters poll of 5.3 percent, but it was an accelaration from a 4.6 percent increase in the year to December.
In one sign of the accumulating pressures, core inflation, stripped of volatile food prices, jumped to 2.6 percent year on year, the highest in at least a decade, from 2.1 percent a month earlier.
In another sign, soaring global commodity costs pushed producer prices up 6.6 percent in the year to January, up from 5.9 percent in December and well above the 6.1 percent rise forecast by analysts.
"The large increase in PPI inflation suggests that price pressures will remain uncomfortably strong, at least for the next few months," said Brian Jackson, economist with Royal Bank of Canada in Hong Kong.
Asian stocks and global commodities edged down, having jumped on Monday when rumours of the lower-than-expected inflation figure first swirled through markets, easing fears that China would need to unleash aggressive monetary tightening.
The Chinese central bank raised interest rates last week for the second time in just over six weeks. It has also raised the amount of money banks have to hold in reserve seven times since the start of last year to try to mop up the excess cash in the economy that has fuelled inflation.
''
''
NEW CALCULATION
The National Bureau of Statistics also announced an adjustment in the way it calculates consumer price inflation, saying that it better reflected the evolution in Chinese consumption patterns.
Housing was given a much larger share of the new CPI basket, while the weighting of food prices was reduced. These changes were consistent with an economy that is fast becoming more prosperous, allowing urbanites to spend a smaller portion of their incomes on basic needs and more on big-ticket items.
Many in the market had expected that the adjustment, conducted every five years, would lower the CPI, but the statistics agency said the adjustment had actually added 0.024 percentage point to January's reading.
"February CPI is expected to be about 5.2 percent, and if it is significantly lower than that, we may conclude that inflation in China has changed fundamentally. Or we can say that the CPI indicator itself is quite doubtful in terms of reliability," said Gao Shanwen, chief economist with Essence Securities in Beijing.
But at least some investors and analysts took the statistics agency at its word, and said that lower inflationary pressure would reduce the need for a big dose of interest rate increases. China's main stock index was steady after soaring 2.5 percent on Monday.
Ting Lu, an economist with Bank of America-Merrill Lynch noted that the biggest surprise was the 10.6 percent increase in food prices year on year.
Many had thought a larger rise was in store, because the Chinese New Year fell earlier in 2011 than 2010 and that was expected to push up food costs in January.
"The implication here is that inflation pressure might be smaller than the market had thought," he said.
''
UPSIDE RISKS
Despite increasing interest rates and raising banks reserve ratios, Chinese officials remain concerned about the still rapid expansion of bank lending.
Banks issued 1.04 trillion yuan in new loans in January, a touch below the market consensus of 1.2 trillion yuan, but still a hefty number when inflation is running near its fastest in three years.
"New yuan loans are at the lower end of the market's expected range, indicating that the regulators' tightening measures have yielded some effect," said Wang Hu, an analyst at Guotai Junan Securities in Shanghai.
"But the figure is still very strong and reflects a robust demand for loans in the first month of this year," he added.
As a centrepiece of its economic policy, China sets loan quotas to guide credit issuance by banks. Because of the country's relatively stunted financial markets, these targets are more important than interest rates in controlling the pace of money growth and inflation in the Chinese economy.
Loan quotas took on extra urgency last month because banks began the year by unleashing their customary early-year lending surge at the same time as officials were trying to slow credit expansion to rein in prices.
Another worry for China is a drought that has beset its major wheat-producing region since October, threatening to push up grain prices and fuel further food inflation.
"The unfavourable weather conditions have raised supply-side risks for production of agricultural products, and simultaneously reinforced inflationary expectations," Qu Hongbin, chief China economist at HSBC, said. - Reuters
In a tentative sign that its actions, from higher interest rates to tighter resrictions on bank lending, have started to bite, money growth eased to its slowest pace in six months in January at 17.2 percent year on year.
"The money supply and lending data suggest that government efforts to clamp down on liquidity might be taking hold, though broad-based inflation provides no leeway for the central bank to relax its tightening stance," said Connie Tse, economist at Forecast PTE in Singapore.
January's inflation was below the median forecast in a Reuters poll of 5.3 percent, but it was an accelaration from a 4.6 percent increase in the year to December.
In one sign of the accumulating pressures, core inflation, stripped of volatile food prices, jumped to 2.6 percent year on year, the highest in at least a decade, from 2.1 percent a month earlier.
In another sign, soaring global commodity costs pushed producer prices up 6.6 percent in the year to January, up from 5.9 percent in December and well above the 6.1 percent rise forecast by analysts.
"The large increase in PPI inflation suggests that price pressures will remain uncomfortably strong, at least for the next few months," said Brian Jackson, economist with Royal Bank of Canada in Hong Kong.
Asian stocks and global commodities edged down, having jumped on Monday when rumours of the lower-than-expected inflation figure first swirled through markets, easing fears that China would need to unleash aggressive monetary tightening.
The Chinese central bank raised interest rates last week for the second time in just over six weeks. It has also raised the amount of money banks have to hold in reserve seven times since the start of last year to try to mop up the excess cash in the economy that has fuelled inflation.
''
''
NEW CALCULATION
The National Bureau of Statistics also announced an adjustment in the way it calculates consumer price inflation, saying that it better reflected the evolution in Chinese consumption patterns.
Housing was given a much larger share of the new CPI basket, while the weighting of food prices was reduced. These changes were consistent with an economy that is fast becoming more prosperous, allowing urbanites to spend a smaller portion of their incomes on basic needs and more on big-ticket items.
Many in the market had expected that the adjustment, conducted every five years, would lower the CPI, but the statistics agency said the adjustment had actually added 0.024 percentage point to January's reading.
"February CPI is expected to be about 5.2 percent, and if it is significantly lower than that, we may conclude that inflation in China has changed fundamentally. Or we can say that the CPI indicator itself is quite doubtful in terms of reliability," said Gao Shanwen, chief economist with Essence Securities in Beijing.
But at least some investors and analysts took the statistics agency at its word, and said that lower inflationary pressure would reduce the need for a big dose of interest rate increases. China's main stock index was steady after soaring 2.5 percent on Monday.
Ting Lu, an economist with Bank of America-Merrill Lynch noted that the biggest surprise was the 10.6 percent increase in food prices year on year.
Many had thought a larger rise was in store, because the Chinese New Year fell earlier in 2011 than 2010 and that was expected to push up food costs in January.
"The implication here is that inflation pressure might be smaller than the market had thought," he said.
''
UPSIDE RISKS
Despite increasing interest rates and raising banks reserve ratios, Chinese officials remain concerned about the still rapid expansion of bank lending.
Banks issued 1.04 trillion yuan in new loans in January, a touch below the market consensus of 1.2 trillion yuan, but still a hefty number when inflation is running near its fastest in three years.
"New yuan loans are at the lower end of the market's expected range, indicating that the regulators' tightening measures have yielded some effect," said Wang Hu, an analyst at Guotai Junan Securities in Shanghai.
"But the figure is still very strong and reflects a robust demand for loans in the first month of this year," he added.
As a centrepiece of its economic policy, China sets loan quotas to guide credit issuance by banks. Because of the country's relatively stunted financial markets, these targets are more important than interest rates in controlling the pace of money growth and inflation in the Chinese economy.
Loan quotas took on extra urgency last month because banks began the year by unleashing their customary early-year lending surge at the same time as officials were trying to slow credit expansion to rein in prices.
Another worry for China is a drought that has beset its major wheat-producing region since October, threatening to push up grain prices and fuel further food inflation.
"The unfavourable weather conditions have raised supply-side risks for production of agricultural products, and simultaneously reinforced inflationary expectations," Qu Hongbin, chief China economist at HSBC, said. - Reuters
really a good tactic to work.
ReplyDeletegood information
Kredit vergleich
I was looking at some of your posts on this website and I conceive this web site is really instructive! Keep putting up.. 2k moulding
ReplyDelete