China's consumer prices surged by 7.1% in January, exacerbating the dilemma for policymakers who face both weakening global growth and a domestic economy still at risk of overheating.
The acceleration in inflation, up from 6.5% in December, came after heavy snowstorms in late January froze power grids and shut down road and rail transportation across much of southern and central China. The severe shortages of daily necessities that followed helped push the monthly inflation reading to its highest level since September 1996. And the snow's impact on prices is likely to be felt further in coming months, as it killed farm animals and damaged crops across a large part of the country.
The continued price increases, which have been gaining speed since early 2007, make it more difficult for the government to stimulate the economy to counter the recent financial-market turmoil and economic slowdown in the U.S. and Europe. China's inflation is still confined almost entirely to food -- where prices rose 18.2% in January -- but officials are concerned those increases could feed into bigger price spirals that would be much more difficult to contain.
All China has to do is go to a core inflation policy and everything will be OK.
And then there is this:
China's producer prices rose last month at their fastest rate in more than three years, adding to the inflationary pressures confronting Beijing policy makers.
Producer prices rose 6.1% in January from the year earlier, data issued by the National Bureau of Statistics showed yesterday. The figure was up from 5.4% in December and was the highest since December 2004.
Curbing inflation and excess liquidity remain the focus of China's economic policy as producer prices, along with other recent economic data, suggest that the impact of the global economic slowdown hasn't been obvious in China so far, said Tao Wang, a Beijing-based economist at Bank of America Corp.
"The growing inflationary pressure, especially with buoyant export and money-supply growth, points to the necessity for China to continue its tight monetary policy," she said.
It's not just a US problem now, is it?
Oh yeah in case you missed this on Friday
The January increase in overall imports resumed the upward trend of the past year after a 0.2 percent decrease in December. The index, which had risen 3.1 percent in November and 1.5 percent in October, is up 13.7 percent over the past 12 months, the largest year-over-year increase since the index was first published in September 1982.
But we should be lowering rates right now....