China Jan consumer inflation quickens to 2.5 percent, beating forecasts

Robyn Ryan
February 15, 2017

This is the highest recorded rate since it was 1.9% two-and-a-half years ago, with the rise largely due to higher prices for motor fuels, which increased by 3.4% between last December and January.

She also pointed out that the spike in wholesale inflation in January was primarily driven by the rise in inflation for fuel and power to 18.1 per cent from 8.7 per cent in December 2016, led by higher prices of coal and mineral oils. This was the lowest since the introduction of the current series of CPI.

The consumer price index (CPI) climbed 2.5 per cent, boosted by the week-long Chinese New Year holiday beginning last month, the National Bureau of Statistics (NBS) said yesterday.

These figures come after the sterling dropped to its lowest levels since 1985.

It's the gain the latter that's of most interest, indicating that inflationary pressures are now clearly accelerating throughout the broader Chinese economy, an outcome one would expect given easy monetary conditions and a clear pickup in economic activity seen in 2016.

"But the honeymoon of rock-bottom price rises is now over with inflation having doubled since October, and set to increase further in the coming months".

Ballooning import prices triggered by the Brexit-hit pound are also expected to bump up prices as companies pass on their soaring costs to consumers.

The official Wholesale Price Index for "All Commodities" in January rose by 1% to 184.6 (provisional) from 182.8 (provisional) for the previous month.

Both consumer and producer inflation will peak soon, Mr Julian Evans-Pritchard, an economist at Capital Economics, wrote in a report.

Deputy chief investment officer Chris Leyland said, 'Around £269bn is sitting in cash ISAs with Inflation at 1.8% compared to average high street cash ISA rates of 0.82%. The pace of food deflation has eased off for four consecutive months.

"The trouble is inflation is rising at an anti-Goldilocks rate - neither bad enough nor mild enough".

'At these rates, cash ISA savers would lose £68bn in buying power over 20 years'.

The weakening pound, coupled with rising oil prices, nearly meant that import prices have leapt by 20.2% since Britain's referendum vote.

It is notable that in his most recent inflation report, Bank of England governor pushed up his outlook for United Kingdom growth, but left his outlook for inflation unchanged.

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