However You Mix The Basket, China’s Inflation Persists

Inflation hasn’t continued its decline from November’s peak, as policy makers had hoped and most analysts doubted. The Consumer Price Inflation number for January has come in at 4.9%, closer to November’s 5.1% than December’s 4.6%, if less than the 5.3% consensus forecast.

Beijing has deployed an old trick: changing the mix of the basket of consumer goods whose prices it samples. It does this every five years. This time, food has been given less weight; property and services more. The National Bureau of Statistics says this has not significantly changed the January number; it actually pushed it up by 0.024 percentage points (see NBS’s chart below). Whatever. The change will certainly have mitigated the 10.3% month-on-month jump in food prices.

What is clear is that inflation is running above target (4% for 2011), is responding slowly to the steady ratcheting up of measures to contain it and that more tightening such as another round of interest rate rises to follow the one earlier this month is likely sooner rather than later.

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One response to “However You Mix The Basket, China’s Inflation Persists

  1. Pingback: China Again Raises Banks’ Capital Reserve Ratios | China Bystander

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