| China's inflation rises with food prices |
SHANGHAI, Mar. 13 -- Chinese consumer inflation rose in February on the back of higher food costs, but economists said they did not expect price pressures to get out of hand despite breakneck growth and plentiful cash in the banking system.
The consumer price index was up 2.7 percent from a year earlier, the National Bureau of Statistics said today. That was more than January's 2.2 percent annual increase but fell short of market forecasts of a 2.9 percent rise, Reuters reported.
Combining January and February to iron out calendar quirks caused by the timing of the Lunar New Year holidays, prices were up 2.4 percent from a year earlier. In the same two months of 2006, the increase was 1.4 percent.
Higher food prices, which make up a third of the consumer basket, have been largely responsible for the rising inflationary trend over the past year. They were up again in February, by six percent over the same month last year.
Gao Shanwen, chief economist at Everbright Securities in Shanghai, said the CPI may climb a bit more but would then slow and average 2.1 percent or 2.2 percent for the whole year, compared with last year's average rate of 1.5 percent.
That was because grain prices were unlikely to keep rising -- a view shared by senior central bank officials, who expect consumer inflation for the year to remain below three percent.
"Grain demand and supply are in balance and will tend to remain balanced this year," Gao said.
But Paul Cavey, an economist with Macquarie Securities in Hong Kong, said inflationary risks were greater than assumed.
"We think food prices in China are being driven by global food prices, which China can't do anything about," Cavey said.
Other prices were also climbing, Cavey said. Although annual non-food inflation in February was just one percent, clothing and durable goods prices are rising for the first time in 10 years.
"That's a trend we expect to pick up pace during the course of this year," Cavey said.
Consumer goods cost three percent more in February than a year earlier, according to the statistics office. In July the inflation rate for this category was just 0.7 percent.
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