Food Prices Confound China’s Slowing Consumer Price Inflation

Consumer prices rose by 5.4% in 2011, far ahead of the government’s target of 4%. But December’s monthly figure was down to 4.1% year-on-year, its slowest growth rate in 15 months, and well down from July’s 6.5% peak (via Xinhua). That suggests there is scope for China’s policy makers to continue priming the credit pumps, if cautiously. Next week’s GDP numbers are likely to show that growth has slowed to below 9% for the first time in ten quarters.  Economists’ consensus is 8.7%; we think the number will come in a tad higher.

The conundrum for political leaders is food prices. They increased by 9.1% in December. Food prices are the component of the consumer price index least amenable to control by monetary policy while also being the most politically sensitive. Rising living costs are a ready cause of public dissatisfaction. Hitting the official inflation target is starting to look increasingly meaningless to Chinese consumers who don’t see the numbers aligning with what is left in their pockets.

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One response to “Food Prices Confound China’s Slowing Consumer Price Inflation

  1. Pingback: All Roads Lead to China » Urban Population 51.27% | Rural Population 48.73%

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