China's Inflation Accelerates on Surge in Price of Pork, Cash From Exports
ELMAT: Easy to solve: use cash to buy pork from Brazil
China's October Inflation Matches Decade High of 6.5% (Update4)
By Nipa Piboontanasawat
Nov. 13 (Bloomberg) -- Inflation in China, the world's fastest-growing major economy, accelerated in October as food prices jumped, increasing pressure on the central bank to raise interest rates for a sixth time this year.
Consumer prices rose 6.5 percent from a year earlier, matching the decade high in August, the National Bureau of Statistics said today, after gaining 6.2 percent in September. That was more than the 6.3 percent median estimate of 20 economists surveyed by Bloomberg News.
Pork prices jumped 55 percent, vegetable costs were up almost 30 percent and three people were killed last week in a stampede for cooking oil in Chongqing. Rising food costs threaten to fan unrest, spur wage demands and undermine the stability of an economy that grew 11.5 percent in the third quarter.
``Food inflation has expanded into other categories -- energy, labor and asset prices,'' said Chris Leung, senior economist at DBS Bank Ltd. in Hong Kong. ``Everyone in China is feeling inflation, especially the poor.'' He expects another rate increase this year.
The yield on one-year central bank bills issued today rose from the sale a week ago on speculation rates will rise. The notes were sold at a yield of 3.94 percent, a 0.15 percentage point increase.
The yuan traded at 7.4307 versus the dollar as of 4:35 p.m. in Shanghai after closing at 7.4123 yesterday. The CSI 300 Index of stocks fell 0.8 percent.
Wen's Pledge
Premier Wen Jiabao yesterday visited poor people in Beijing's Dongcheng district, expressing concern at inflation and pledging to stabilize prices, the government said.
The stampede at the Carrefour SA supermarket was after an offer of 11.5 yuan discounts on 51.4 yuan five-liter bottles of cooking oil, state media reported. Soaring consumer prices helped trigger the Tiananmen Square protests that were crushed by the army in 1989.
``Prices have been on the rise these days and I know that even a one-yuan increase in prices will affect people's lives,'' Wen said, according to a statement posted on the government's Web site. One yuan is about 13 U.S. cents.
China's inflation compares with the 2.8 percent increase in the U.S. in September from a year earlier and the 2.97 percent gain in India, the world's second-fastest growing major economy, in the week ended Oct. 27.
Blue Ear Disease
Food prices account for a third of the consumer-price index.
Pork prices soared this year after farmers cut production because of increased feed costs and outbreaks of Blue Ear Disease in pigs. Edible-oil prices, up 34 percent, climbed on reduced oil-seed crops, while bad weather pushed up vegetable prices in October, according to the Ministry of Commerce.
Price increases for non-food items were 1.1 percent, the same as in September. Still, there's pressure for inflation to accelerate further.
The government this month raised prices for gasoline, diesel and jet fuel as crude oil surged to records.
Producer prices jumped 3.2 percent in October from a year earlier after climbing 2.7 percent in September, the statistics bureau said yesterday.
October's record $27 billion trade surplus pumped more cash into the economy. M2, the broadest measure of money supply, rose 18.5 percent last month from a year earlier.
Money-Supply Growth
``Money supply is growing very fast and that is worrying because it may push inflation higher,'' said Paul Cavey, an economist at Macquarie Securities Ltd. in Hong Kong.
Three days ago, the People's Bank of China ordered lenders to set aside 13.5 percent of their deposits from Nov. 26, the highest proportion since at least 1987. The central bank has pushed the benchmark one-year lending rate to a nine-year high of 7.29 percent.
For the first 10 months, consumer prices climbed 4.4 percent.
The central bank last week forecast full-year inflation of about 4.5 percent because of consumers' expectations that prices will rise and pressure from food, energy and labor costs. Inflation of 3 percent is the central bank's annual target.
A sixth increase in interest rates is likely this year, according to a Bloomberg News survey of economists.
To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net |
