BEIJING (Reuters) - China’s consumer inflation beat forecasts in February, accelerating at its fastest pace since July 2014, while producer prices slowed their slide for the second straight month, taking some pressure off policymakers to rush out more monetary easing.
While the food-driven consumer price increase is likely to be welcomed by regulators worried that China could fall into a deflationary trap, some economists expect upward price pressures in the months ahead to be modest.
Annual consumer inflation edged up to 2.3 percent in February, the National Bureau of Statistics said on Thursday, from January’s 1.8 percent and above the 1.9 percent predicted by analysts.
That was the fastest year-on-year increase since July 2014.
A 7.3 percent pick-up in food prices was mainly due to cold weather and the Chinese New Year seasonality effect, Yu Qiumei, a senior NBS statistician, said in a statement accompanying the data. Non-food inflation was 1.0 percent.
“Inflation is much higher than expectations,” said Guo Lei, chief economist at Founder Securities, in Shanghai.
“The recent rebound in oil prices, recovery in food prices and surging home prices in big cities all contributed to higher inflation in February. We think inflation will not surpass the government target of 3 percent this year but the rising inflation will obviously restrict room for further policy easing.”
China aims to keep consumer inflation at around 3 percent in 2016 to reflect factors such as rising labor cost, price fluctuations of agricultural products and the impact of further price reform.
“A target of higher price increases will be conducive to reducing expectations of deflation,” the National Development and Reform Commission (NDRC), the country’s top economic planner, said in a work report on Saturday.
China’s consumer price index rose 1.4 percent in 2015 from a year ago, far short of Beijing’s 3 percent target for 2015.
Despite February’s encouraging headline numbers, ANZ economists say the rise in food prices is likely to be temporary and that consumer inflation will remain mild in coming months.
“Daily wholesale food prices show that prices have moderated slightly in early March,” ANZ said in a research note.
“Non-food CPI edged down to 1.0 percent year-on-year in February, 0.2 percentage points lower than that in January, reflecting disinflation in the other components of the CPI.”
Reflecting sluggish demand at home and overseas and overcapacity in key sectors, China’s producer prices remained stubbornly weak, with the producer price index sliding 4.9 percent in February from a year ago.
Premier Li Keqiang acknowledged in parliament on Saturday that leaders face “a tough battle” to keep the economy growing by at least 6.5 percent over the next five years, while pushing hard to create more jobs and restructuring state-owned enterprises.
China’s trade data released on Tuesday also showed entrenched weakness in the economy as exports tumbled at their fastest pace in more than over six years and imports fell for 16th straight month.
(This story corrects typographical error in the lede)
Additional reporting by Nathaniel Taplin in SHANGHAI and the Beijing monitoring team; Editing by Sam Holmes