China’s Inflation Unexpectedly Rebounds In January

The Chinese inflation unpredictably rebounded in January, as a weeklong holiday boosted the consumer’s spending along with the gains in the food prices.

The Chinese economy released the annual figures for the producer prices index, where it met economists’ expectations of 0.7%, yet this reading is a retreated reading compared with the prior year’s reading of 1.7%.

The National Bureau of Statistics announced that the Chinese consumer prices advanced 4.5% compared with the prior year’s figures of 4.1%, and in exceeded economists’ expectations of 4 percent.

Today’s data may support Premier Wen Jiabao’s caution in adding stimulus policies to support the nation’s growth, as the Chinese government raised retail fuel charges yesterday and companies said last month that they raised prices to counter higher wages and commodity costs.

Additionally, some economists speculate that the Inflation will moderate in the coming months and fall below 3% by the mid-year, yet the government may not ease the imposed policies as they remain cautious about the increased risks of the imported inflation from commodity prices along with a possible rebound in economic growth if the European situation improves.

On the other hand, the producer prices index figures met economists’ expectations and eased to 0.7% in January, yet it recorded a retreated reading compared with the prior year’s reading of 1.7%.

While inflation exceeded the government’s 2011 targeted level of 4%, the government has yet to announce an inflation goal for this year.

The central bank cut lenders’ reserve requirements in December for the first time in three years to boost credit amid moderating overseas sales and a campaign to cool property prices that reduced home transactions.


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