China consumer inflation quickens in January

China's consumer inflation rate climbed higher in January, official data showed Thursday, as the world's second-largest economy struggles with slower growth. The consumer price index (CPI) - a main gauge of inflation - rose 1.8 percent last month from a year ago, the National Bureau of Statistics (NBS) said in a statement, slightly below the median forecast of 1.9 percent in a survey of economists by Bloomberg News.
It edged up from December's 1.6 percent increase and was the highest rate since August last year. Food prices, however, rose much faster, increasing 4.1 percent year-over-year, boosted by seasonal demand due to the Lunar New Year holiday, which fell earlier this month. Moderate inflation can be a boon to consumption as it pushes buyers to act before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can hurt growth.
The producer price index (PPI), which measures prices of goods at the factory gate, fell 5.3 percent year-on-year in January due to weaker domestic demand and lower commodity prices, a slight improvement on December's decline and its 47th consecutive monthly fall.
Overcapacity in manufacturing has been a major drag on China's growth and the protracted declines in PPI bode ill for industrial prospects. Julian Evans-Pritchard of Capital Economics said the rise in prices was due to expected seasonal pressures, but predicted that inflation was set to edge up this year, citing a sharp fall in the number of pigs as a driver for higher food prices.
According to industry websites, high feed prices and low pork values last year saw producers reduce herd sizes. Growth slowed to its lowest rate in a quarter of a century last year as Beijing strove to effect a difficult transition in the country's economic model away from reliance on exports and fixed-asset investment towards one driven by consumers. Consumer prices for transport and telecommunications products experienced deflation in January, the data showed, dropping 1.6 percent on the year.