Inflation up as food, energy costs increase
By Nipa Piboontanasawat (Bloomberg)Updated: 2006-12-08 11:24
Inflation in China, the world's fastest-growing major economy, probably picked up in November as food and fuel costs increased.
Consumer prices rose 1.5 percent from a year earlier after gaining 1.4 percent in October, according to the median estimate of 21 economists surveyed by Bloomberg News. Producer prices likely rose 3 percent, the survey showed.
Inflation hasn't topped 2 percent since March 2005 even as economic growth accelerated to a decade-high this year, damping expectations that the central bank will add to two lending rate increases since April.
"Inflation is very benign in China right now," said Kent Yau, an economist at Core Pacific-Yamaichi International Ltd. in Hong Kong. "Food is the major shifting factor."
The statistics bureau will report producer inflation today at 10 a.m. and consumer prices on Dec. 11.
Central bank Governor Zhou Xiaochuan, who raised the benchmark lending rate twice this year, on Nov. 20 said pressure for further interest rate increases "has eased a bit" after economic growth slowed to a "reasonable" pace.
The central bank last month forecast consumer inflation will ease to 1.5 percent for 2006 from 1.8 percent in 2005. Even so, it said inflation could quicken as the government deregulates energy prices and raises welfare spending. In addition, a possible rebound in investment could send raw material costs higher, the bank said.
Bloomberg Survey
Zhou raised interest rates in April and August and has ordered lenders to set aside more money as reserves three times this year. It also sold treasury bills to remove cash from the financial system.
Growth in M2, the broadest measure of money supply which includes cash and all deposits, likely slowed to 16.9 percent from 17.1 percent in October, the Bloomberg News survey showed. The central bank may report money supply figures as early as Dec. 11.
China, which controls gains in the yuan, should allow faster currency appreciation to prevent export-driven money inflows from fanning inflation, the Organization for Economic Cooperation and Development said Nov. 28.
"The large inflows of foreign exchange are spilling over into excess liquidity and contributing to the problem of over- investment," said Julian Jessop, an economist at Capital Economics Ltd. in London. "In the near term this is putting upward pressure on inflation."
China's trade surplus may swell 65 percent to a record $168 billion this year, the customs bureau indicated yesterday.
The following tables shows economists' estimates for percentage changes in China's consumer and producer prices and M2 money supply in November from a year earlier.
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