CONSUMER prices in China rose more sharply than expected in March, official figures showed yesterday, raising fears that the authorities may have less room than hoped to stimulate economic growth through lower interest rates.
Inflation jumped to 3.6 per cent in the year to March, up from 3.2 per cent a month earlier and representing a substantial deviation from the trend of declining price rises experienced in recent months.
Pork and vegetables drove the rise, with the price of the staple meat shooting up 11.3 per cent and vegetable price inflation hitting 20.5 per cent.
Overall food prices rose 7.5 per cent, while non-food prices increased 1.8 per cent in the year, compared with 1.7 per cent in the 12 months to February.
Rising oil prices also pose an inflationary risk to the economy, and economists believe the two factors combined will prevent any sharp monetary loosening, despite economic forecasts pointing to growth of around eight per cent this year – the slowest rate in almost a decade.
“The latest growth slowdown and inflation rebound are still within policymakers’ expectations, and we continue to expect selective easing on credit, more fiscal spending, and support for new and continuing projects to ensure a soft landing for the Chinese economy in 2012,” said Jian Chang, China economist at Barclays.
“However, there will be no aggressive monetary easing – policymakers are aware of the upside risks to inflation from the pick-up in oil prices and uncertain food prices, and therefore will only ease at a measured pace.”
Producer prices fell 0.3 per cent on the year.