China Inflation


Inflation continues to moderate in December

In December, consumer prices rose 4.1% over the same month the year before, which was below the 4.2% registered in November. Although the reading missed the 4.0% expected by the market, the current rate is still the lowest seen since September 2010. The main cause of the December moderation was lower prices in the non-food categories, particularly housing, which offset higher prices for food. According to analysts, food prices benefited from strong demand before the Lunar New Year. Core inflation, which strips out volatile food costs, also slowed from 2.2% in November to 1.9% in December, which represents the lowest reading recorded since November 2010. Meanwhile, producer price inflation continued to slow, and fell for the fifth month in a row, from 2.7% in November to 1.7% in December. The print was in line with market expectations and, in fact, represents the lowest reading seen since December 2009. Due to the December fall, annual average producer price inflation slowed from November's 6.4% to 6.0%. For 2011 as a whole, annual inflation reached 5.4%, which is up from the 3.3% observed in 2010.

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