BEIJING: China’s consumer inflation picked up for a third-straight month in November, while industrial inflation came in much stronger than expected. Beijing will need to watch price levels closely to contain asset bubbles. Apart from higher food prices, China’s still-strong housing market has pushed up prices for household goods and general consumer demand, economists said. A recent rebound in commodities prices helped improve companies’ profitability by pulling China’s producer prices out of deflation.
China’s consumer-price index increased 2.3% in November from a year earlier, a quicker pace than a 2.1% year-over-year gain in October, the National Bureau of Statistics said Friday. The key inflation reading slightly outpaced the median forecast for a 2.2% gain from a Wall Street Journal survey of 14 economists. “The big picture is that China’s stimulus-driven recovery has stoked domestic price pressure this year,” said Julian Evans-Pritchard, an economist at Capital Economics. A big factor in higher prices was fresh vegetable prices, which climbed 15.8% from a year earlier last month, lifting the headline CPI figure by about 0.37 percentage point.
Chinese investors have rushed to bet on vegetable prices rising, especially garlic, with such speculation fueled by the latest round of monetary easing, economists have said. Garlic prices, which have almost doubled this year, have caught officials’ attention. Last month, Li Pumin, a spokesman for the nation’s economic-planning agency, said that the government is working to curb speculation by boosting supplies.
Liu Yun, a 62-year-old sanitation worker buying groceries in Beijing, said vegetable prices, including lettuce, asparagus and garlic, have jumped faster than pork or other meats lately. Cabbage prices in particular have doubled in the past six months, she added. To save money, Ms. Liu said she checks food-price indexes in the local newspaper and shops in supermarkets where produce is often less expensive than at local fruit markets while sometimes not as fresh. “Food is getting so expensive,” she said. Gasoline and diesel prices were up 4.6% and 6.0% respectively. Higher prices at the factory gate were caused by higher coal, steel and other commodity prices last month and by increased domestic demand fueled by infrastructure spending, economists said. Another factor, they said, are state-directed capacity cuts in the steel and coal industries.
China’s producer-price index rose 3.3% in November from a year earlier, compared with a 1.2% on-year increase in October. The PPI increased 1.5% in November from a month earlier. In October, it rose 0.7% from the preceding month. Economists’ median forecast had been for only a 2.4% increase.
Beijing in coming months is likely to keep a close eye on the price indexes to prevent asset bubbles and excessive credit, economists said. In recent months, restrictions have been imposed on property buyers in major cities in a bid to dampen speculation.“Inflation looks modest now but the upward trend is worrisome,” said Liu Xuezhi, an economist at Bank of Communications. It is only a matter of time before higher industrial prices will be passed onto consumers, Mr. Liu said.
