China Q4 CPI expected to rise, leaves little room for policy easing
(Reuters) – China’s annual consumer inflation rate rose to a seven-month high of 3.1 percent in September as poor weather drove up food prices, limiting the scope for the central bank to maneuver to support the economy even as exports showed a surprise decline.
But few analysts expect a further sharp rise in inflation or policy tightening in coming months as the world’s second-largest economy still faces a weak global environment and Beijing tries to tap the brake on credit-fuelled investment.
The inflation rate was higher than a median forecast of 2.9 percent in a Reuters poll and August’s 2.6 percent, but was still below the official target of 3.5 percent for 2013.
“We expect CPI inflation to rise further in Q4 and see rising risks that it may rise above 3.5 percent for some months in 2014,” said Zhiwei Zhang, China economist at Nomura in Hong Kong.
“The rise of CPI inflation leaves little room for policy easing as the benchmark deposit rate is only 3 percent.”
Upbeat September credit data released later on Monday signaled that the central bank may have already eased up its control on bank lending following a liquidity crunch in June, which analysts warn could fan property bubbles and long-term inflation risks.
Month-on-month, consumer prices rose 0.8 percent, the National Bureau of Statistics said, bigger than a rise of 0.5 percent expected by economists.
Food prices gained 1.5 percent in September from August due to droughts and floods in some areas, pushing up the CPI by 0.51 percentage points, Yu Qiumei, a senior statistician at the bureau, said in a statement.
In annual terms, food prices jumped 6.1 percent.
“September CPI inflation gained more momentum on seasonal factors and a low base effect from last year,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.
“But we think the inflation situation is still under well control and will not be a concern this year, especially when the economy is struggling with over-capacity problems.”
China’s exports dropped 0.3 percent in September from a year earlier, against expectations of a 6 percent rise, data showed on Saturday, a disappointing break to a recent run of indicators that had signaled the economy may be regaining momentum.
The decline in exports also raised questions about the strength of the global economic recovery, though solid import data for the same month helped offset some concerns.