Inflation in China inches up to 2% in November

Inflation in China inches up to 2% in November Beijing: China's consumer price index (CPI), a main gauge of inflation, marginally rose to two percent in November due to surging food prices.

On a month-on-month basis, November's CPI rose by 0.1 percent from the previous month, China's National Bureau of Statistics (NBS) announced Sunday.

"November growth rate was largely attributable to a surge in food costs," Wang Jun, an official of the China Center for International Economic Exchanges told the official media here.

The CPI stood at 33-month low of 1.7 percent in October.

Food prices that account for nearly one-third of the weight in China's CPI calculation, rose 3 percent in November from a year ago, pushing the index up 0.95 percentage points.

Vegetable prices jumped by 11.3 percent year-on-year in November as cold weather disrupted supplies.

Prices for aquatic products gained 4.9 percent from one year earlier, the NBS statement said. Excluding food prices, China's CPI edged up 1.6 percent.

Wang forecast that China's economy will expand by 7. 8 percent in 2012 and that the CPI will reach around 2.8 percent for the entire year, well below the government's target of keeping inflation under 4 percent.

"A combination of low inflation and modest economic growth is surely a desirable outcome for China in the difficult year of 2012," he told state-run Xinhua news agency.

Wang said he believes the CPI will pick up in 2013, but not dramatically. "Consumption and investment will maintain mild growth next year, which will prevent the economy from overheating and be conducive to controlling inflation."

The NBS also said China's producer price index (PPI), which measures inflation at the wholesale level, fell 2.2 percent year on year in November -- marking the ninth straight month of decline after the PPI dropped in March for the first time since December 2009.

However, the decline was smaller than 2.8-percent drop in October, indicating the economy has been stabilising.

Because of sluggish external demand and a cooling property market, China's economy grew 7.4 percent in the July- September period, its weakest in more than 3 years.

In order to buoy growth, the central bank lowered benchmark interest rates twice this year, cut banks' reserve requirement ratios (RRR) by 100 basis points, pumped liquidity into the market and approved a series of infrastructure projects worth more than 1 trillion yuan.

A mild rise in the CPI and a recovery in factory-gate prices, however, has dampened expectations of further policy loosening as the economy recovered.

Wang said the country should continue to maintain a positive fiscal policy and a stable monetary policy over a period of time to consolidate the economic recovery momentum.

Liu Ligang, an economist with ANZ National Bank Ltd, said the possibility of a 50-basis-point RRR cut cannot be ruled out in December.

PTI