Economist Online
SUBSCRIBE:

Saturday, March 15, 2008

China inflation update

China's inflation rose 8.7% over a year ago in February. Very worrisome. According to Morgan Stanley,
The jump was larger than our expectation (+7.8%), as food prices surged 23.3%, steeper than our projection of 20.5% and contributing 90% of the month's inflation. Following the snowstorms, fresh vegetable prices jumped 46% YoY in February (+13.7% in January and +8.9% in 2007), while the supply of meat and poultry (+45.3% in February versus +41.2% in January and +31.5% in 2007) remained tight, especially that for pork (+63.4% in February versus +58.8% in January and +48.3% in 2007).
In the non-food categories, there was a noticeable increase in utilities (+6.5% in February versus +5.5% in January and +3% in 2007), but other items showed stable trends. The Lunar New Year effect eased on items such as intercity transport (+4.2% in February versus +6% in January) and travel (+1.8% versus +5.1%) services, bringing overall service inflation to 2%, down from 2.6% in January.