Food price rises build inflationary pressure

16  January 2013

BEIJING – Increasing food prices are driving China’s inflation higher, a trend seen to limit authorities’ space to soften their monetary stance in the coming year.

The consumer price index, a main gauge of inflation, will continue to speed up in December and during the year after its growth was at its slowest in 33 months in October 2012, analysts said.

The CPI will rise around 2.4 percent year-on-year in December while food prices will climb 2.5 percent from November, said Lian Ping, chief economist of the Bank of Communications.

The country’s inflation rate dropped to 1.7 percent in October due to the cooling economy after reaching a 37-month high of 6.5 percent in July 2011.

It went up to a year-on-year growth rate of 2 percent in November due to higher food prices. The December data will be released Friday.

Snow in north China and low temperatures in the south affected vegetable growth and transportation, pushing prices up for nine weeks in a row since November, Lian explained.

More consumption of meat during the cold weather also led to higher prices of pork, a staple food in the country, he said.

In the week ending December 30, the average wholesale price of 18 types of vegetables gained 2.9 percent week on week in 36 major Chinese cities and pork went up 0.9 percent, Ministry of Commerce data showed.

Vegetable prices are expected to soar 8.36 percent month on month in December, bringing the year-on-year CPI growth of that month to 2.3 percent, according to a research report by Sinolink Futures.