As expected China’s February inflation rate leapt on the impact of bad weather and high prices for energy and food.
The country’s Statistics Bureau said consumer prices rose 8.7% last month compared to February 2007.
That was after rising a sharp 7.1% in January when the severe snowstorms first hit.
The rise was faster than most market estimates which were around 7.9%.
Inflation has surged since March last year as the cost of food, such as pork, vegetables and cooking oil, have risen strongly. Soaring prices for oil products, such as petrol and diesel and for coal, especially in January and February, added an extra upward push to prices.
The snowstorms boosted food and fuel prices because transport bottlenecks disrupted supplies. Coal exports have been banned for the time being to allow power station stocks to be rebuilt.
The news came a day after China’s customs bureau said that the trade surplus fell 64% compared to February 2007 to just $US 8.56 billion, after rising 23% in January, and producer prices rose 7.1%.
Exports rose 6.5% in February, the slowest pace in almost six years. But that’s misleading as the February 2007 level of shipments was 52% higher and boosted by exporters bringing forward sales to beat tax changes.
The trade surplus fell 29% to $US28 billion from the first two months of 2007.
China’s week-long Lunar New Year holiday also started earlier this year than last, and exporters brought forward February shipments to January to generate sales and cashflow.
That impacted consumer prices because the Lunar New Year is a time of peak demand for food, and energy, with both in short supply for more than a month.
In the 7.1% rise in producer prices last month the cost of crude oil soared 37.5%, while raw coal climbed 19.4%. Food, one of the key drivers of consumer-price inflation, rose 11%.
But the Statistics Bureau said that non-food inflation edged up to an annual rate of 1.6% in February, up from 1.5% in January. Excluding food and energy, prices rose 1%.
So while producer prices have risen now for seven months in a row and have been rising faster, that hasn’t impacted price levels in the wider economy as much as one would have thought.
But it was the fastest pace in three years for producer-price inflation, so there will have to be a wider impact soon.
Economists will now be looking for a slowdown in inflation and a widening in the trade gap from March-May onwards, otherwise the China boom will have reached a delicate stage and one not good for the likes of Australia (or China for that matter).
