China inflation up after food, fuel increases

INFLATION IN China rose in March as a stark increase in food costs and fuel prices set by the state pushed up the consumer price index, data from the National Bureau of Statistics showed yesterday.

Consumer prices rose 3.6 per cent over a year earlier, up from February’s 3.2 per cent but still shy of the government’s 4 per cent target for the year. February’s growth rate was the slowest pace of price increases in 20 months.

Inflation hit a high of 6.5 per cent last July, but has gradually slowed since then.

The Beijing government is engaged in a delicate balancing act between keeping prices in check and trying to boost flagging growth in what is the world’s second-largest economy. China has cut its economic growth target to 7.5 per cent this year, from 8 per cent last year.

While the government tightened lending and put the brakes on too much investment in 2009 and 2010 to cool inflation, a sharp fall in export demand caused them to rethink.

In recent months, Beijing is working to ease lending curbs to help companies under pressure as global demand slips. Food costs, which account for nearly one-third of the weighting in the CPI calculation, rose by 7.5 per cent, up from the previous month’s 6.2 per cent but still well below last years double-digit rates.

Tang Jianwei, a senior analyst at the Bank of Communications, told the Xinhua news agency bad weather had contributed to the strong rise in food prices and he expected the surge to abate when the weather warmed up.

According to the Ministry of Commerce, vegetable prices had already started to fall last month.

The price of pork, China’s staple meat, went up 11.3 per cent year-on-year in March, pulling back 4.6 percentage points from February.

Meanwhile, to reflect price changes on the international crude oil market, China last month lifted fuel prices for the second time in a year.

The forecasts have generally been for prices to rise in March but to moderate in coming months and finally to come in under the target increase in the full year.

First-quarter economic data is due out on Friday and this is expected to confirm a picture of flagging growth, as the impact of Europe’s debt crisis and the slow US economic recovery hits export demand.