China Inflation Higher than Forecast

In a sharp turnaround from the past several months, China’s consumer price index rose in January to 4.5%, higher than the 4.1% forecast. Inflation in China has been easing, from highs over 6% last summer to 4.2% in November and 4.1% in December.

Some economists say that the lunar new year holiday, which came early this year, caused the jump in inflation. For example, food prices rose 10.5% as people spent more freely. According to this view, the inflation figure for January should not be given too much weight. Once the data settles over the next couple of months, then some conclusions may be drawn about what happened in January.

Other economists, including analysts from RBS according to Bloomberg News, say the jump cannot be wished away by seasonal factors. Inflation in January rose at the fastest rate since November 2010. The government has been taking steps to slow inflation, but the cooling of the economy has now become an issue. How the government lights a fire under exports at the same time that it tries to keep inflation in check is the problem China faces going forward.