China Inflation Rises 6.1%, Matches Forecasts

China’s inflation exceeded 6 percent for a fourth month as officials across Asia struggle to cool prices even as growth slows.

Consumer prices increased 6.1 percent in September from a year earlier, the National Bureau of Statistics said today. That matched the median forecast in a Bloomberg News survey of 22 economists and followed a 6.2 percent gain in August.
Elevated inflation is limiting Premier Wen Jiabao’s room for easing monetary policy as Europe’s debt crisis cuts demand for exports and small businesses in China report a credit squeeze. Food costs drove price gains, with pork jumping 44 percent from a year earlier, while non-food and producer prices increased at a slower pace than in the previous month.

“It is too early to call a victory over inflation,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd., who previously worked for the World Bank. At the same time, “partial” easing, such as lowering reserve requirements for smaller banks, is possible to aid small and medium-sized businesses, he said.

Producer prices rose 6.5 percent in September from a year earlier, a separate report showed. That was less than the 6.9 percent median estimate in a Bloomberg survey of economists and also the smallest gain this year. In August, the increase was 7.3 percent.

Stocks Slide

The Shanghai Composite Index slid 0.6 percent as of 10:06 a.m. local time. The yuan rose 0.1 percent to 6.3784 per dollar in Shanghai. Today’s inflation number underscored pressure on the government to allow gains in the currency to counter inflation even as the outlook for exports dims.

Yum! Brands Inc., owner of the Taco Bell and KFC restaurant chains, said last week it expects food inflation in the “mid- teens” in China this quarter and plans to increase prices gradually to offset labor and commodity costs.

China’s food prices rose 13.4 percent in September from a year earlier, the same pace as in August, today’s report showed. Non-food inflation cooled to 2.9 percent from 3 percent.

Growth in the world’s second-biggest economy is already slipping, with analysts forecasting that data next week will show a 9.3 percent expansion in the third quarter, down from 9.5 percent in the previous three months.

India is also due to report inflation numbers today, with economists’ median forecast indicating a 9.75 percent increase in prices. China’s statistics bureau will release gross domestic product data on Oct. 18.

Property, Trade

Trade numbers reported yesterday showed growth in overseas sales weakened in September, underscoring the threat that Europe’s crisis poses to the world’s biggest exporting nation.

In Beijing, officials are also monitoring a slowdown in the housing market after increases in interest rates and bank reserve requirements and a campaign to rein in speculation. Home prices fell month-on-month for the first time in a year in September, according Soufun Holdings Ltd., China’s biggest real- estate website owner.

The State Council this week unveiled tax breaks to support small businesses after some manufacturers collapsed in the city of Wenzhou in Zhejiang province.
Inflation reached a three-year high of 6.5 percent in July and may moderate in coming months partly because of so-called base effects. The government’s full-year target is 4 percent.(Bloomberg)