China’s Inflation Fastest Since Mid-2014 as Food Prices Soar in February

China’s Inflation Fastest Since Mid-2014 as Food Prices Soar in February

China’s consumer price has seen the highest rise since mid-2014 in February as food prices jumped in the week-long Lunar New Year holidays, where millions fling on roast pork, duck, vegetables and seafood.

China’s consumer price index rose to 2.3 percent in February from last year and up from 1.8 percent from January as food prices jumped 7.3 percent. Non-food prices mitigated from a month earlier to a 1 percent increase and services inflation slowed in the same period raising questions over the durability of that surge.

The producer price index dropped 4.9 percent narrowing from a 5.3 percent decrease in January. This extends the decline for a record 48 months.

If stabilization in prices sustained in the next few months, this will ease most policy maker’s concern over deflation, discouraging new investments while eroding the profit margins. The consumer price index still remains well below the 3 percent, governments target for this year. This means there is no such constraint yet on policy maker’s scope for easier monetary policies.

According to Nomura Holdings Inc. Chief China economist in Hong Kong Zhao Yang, food prices jumped before the Spring Festival and a certain cold wave pushed them even higher. However, he also mentioned that the jump is temporary and inflation will not become a big concern that would limit China’s monetary policy.

According to Zhao, inflation will began to moderate again in next few months, while there may be some risk of rising rents in China’s biggest cities as property prices starting to recover.

Prices of mining and raw materials remained biggest draggers on factory prices.

The recent rebound on China’s inflation compares with a subdued picture in some of world’s other large economies. In Japan, central bank’s key price indicator did not change in January, hovering around zero compared with a 2 percent inflation target. Consumer prices in Euro-zone rose 0.3 percent in January, keeping pressure on European Central Bank to relax its monetary policies. Meanwhile, in U.S, the cost living excluding food and fuel jumped the most in four years in January while the primary consumer-price measure climbed to 0.3 percent.

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