China’s Consumer Inflation Could Hit 5% in January, Analysts Say

(Bloomberg) --

China’s consumer inflation will continue rising and could peak at around 5% or even 6% in January before gradually falling back, according to economists.

The consumer price index rose to a 7-year high of 3.8% in October due to soaring pork prices, and the demand from the Spring Festival in late January will push it higher to at least 5%, according to economists from Barclays Plc, Citigroup Inc., and Bank of China International Ltd. Huachuang Securities Co. said the headline number could even hit 6%.

Inflation will then likely slow down from that January peak, according to China Merchants Securities Co. While non-pork price rises remain benign for now, the brokerage house warned that the cost of eggs, seafood and cooking oil are most likely to rise, based on previous periods of pork price inflation.

The rising prices will complicate monetary policy, with markets closely watching how the People’s Bank of China balances the competing demands from rising consumer prices and falling producer prices over the rest of the year.

The demand-supply imbalance of pork will “likely become acuter” and push pork inflation to a near-term high around Chinese New Year, Yu Xiangrong, an economist at Citigroup in Hong Kong wrote in a note. “The window for further policy easing will open wider,” when consumer inflation starts to decline after the new year.

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