BEIJING, Feb 5 (Reuters) - China's annual consumer inflation
likely eased from December's seven-month high despite continued
strength in meat and vegetable prices, with most economists
seeing price pressures remaining at bay for a few months at
A median forecast of 17 economists showed inflation running
at 2.0 percent in January, ahead of the Lunar New Year, China's
most important holiday. That's down from a seven-month high of
2.5 percent in December, when a cold snap drove up vegetable
'The fall will be food-driven, and not as steep as consensus
has it, but should have a positive impact on the current mood,
creating an impression of a Goldilocks economy with inflation
under control and solid growth,' wrote Credit Agricole economist
'This is unlikely to last: we see a modest growth slowdown
and a pick up in inflation from Q213 on.'
Where economists see a comfortable lack of price pressure,
giving policymakers room to keep liquidity in the system for the
time being, a Chinese shopper sees sticker shock.
Chinese consumers are particularly sensitive to food prices
before the New Year, when far-flung families gather for
Indeed, food prices are likely to be a significant driver
for January's inflation figure. Data compiled by China's
Ministry of Commerce shows that the prices of most vegetables
continued to rise in January compared with end-December levels,
as did prices for pork, China's staple meat.
Tofu, cooking oil and poultry prices fell, reflecting a
steady fall in international soybean futures from record highs
reached in the summer.
However, the price of beef and mutton, consumed more in the
north and west, is at an uncomfortable 60 yuan ($9.64) per
kilogram. That's more expensive than average retail beef prices
tracked by the United States Department of Agriculture, despite
much higher average incomes in the U.S. than in China.
Public discomfort with rising prices could increase this
summer, when cyclical factors are expected to once more push up
pork prices after a benign 2012.
That could test policymakers, which have allowed moderate
policy easing to offset the impact of sluggish demand from
China's export markets, and the ongoing effects of credit curbs
designed to curb real estate speculation.
Nomura economists Zhiwei Zhang and Wendy Chen noted that
sharp rises in input prices reflected in complementary
Purchasing Managers' Index (PMI) surveys published last weekend
points to an upward trend in inflation this year.
Producer prices in China tumbled for much of last year, as
weak demand weighed on the cost of raw materials.
Economists polled by Reuters predicted China's producer
price index likely dipped 1.6 percent in January from a year
ago, moderating from December's annual factory gate deflation of
1.9 percent thanks to firming economic growth and a lower base
Late last month, the Chinese Academy of Social Sciences
revised up its growth forecast for 2013, reflecting a revival in
the pace of growth that began in the fourth quarter. But it also
revised up its forecast for 2013 inflation to 3.5 percent, from
its previous outlook of 3.0 percent.
Wary of triggering a spike in inflation, the People's Bank
of China has prefered quiet tweaks to forceful policy easing.
After cutting interest rates twice between June and July
last year, it has abstained from further cuts despite widespread
market calls for looser policy.
It has also refrained from lowering banks' reserve
requirements (RRR) since May 2012, when it cut the ratio of cash
it requires lenders to hold as reserves by 50 basis points to 20
percent for China's biggest banks.
Instead, the central bank has preferred in recent months to
ease policy by adding cash through short-term open market
operations, a measure that analysts say is more flexible than
outright cuts in rates or reserve requirements.
China's National Bureau of Statistics will release official
CPI and PPI data on Friday.
FORECAST PPI CPI
(percent change y/y)
Bank of Communications -1.8 1.8
Barclays ~ 2.2
BofAML -1.4 1.9
CDB Securities -1.7 2.0
Changjiang Securities -1.8 2.2
China Construction Bank -1.6 2.3
Citi -1.1 1.9
CITIC Securities -1.6 1.7
Credit Agricole-CIB ~ 2.2
Deutsche Bank -1.5 2.0
Hwabao Trust -1.7 1.8
Industrial Bank -1.7 1.8
Mizuho Sec. -1.5 1.7
Peking First Advisory -1.5 2.1
Shanghai Securities -2.0 1.8
Shenyin & Wanguo -1.8 2.1
UBS -1.6 2.0
Median -1.6 2.0
High -1.1 2.3
Low -2.0 1.7
Prior -1.9 2.5
> For more stories on China's economy,
> China's economic indicator calendar and polls
> All Chinese economic data
($1 = 6.2270 Chinese yuan)
(Reporting By Lucy Hornby and China Economics Team; Editing by
Keywords: CHINA ECONOMY/INFLATION
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