Soaring food and transportation costs pushed China's annual inflation rate to 8.7 percent in February, its highest level since 1996. The impact of winter storms on food prices will soon lift the country’s Consumer Price Index to 8.7 percent for all of February, the highest monthly rate May 1996, The People’s Bank of China announced Tuesday. "It's necessary and possible for the central bank to raise interest rates in late March," in an effort to control rising inflation, the bank said in its report. The snowstorms occurred in mid-January.
The Consumer Price Index gained 7.1 percent in January on soaring food prices coupled with supply-side pressure and higher transportation costs. China's Corporate Goods Price index rose by 1.1 percent in January from December, and 8.4 percent on-year. The CGP index reflects price changes of products traded among corporations and traces overall price fluctuations. In theory, rising prices could erode the profitability of Chinese exports and/or make China a less desirable sourcing location for some global corporations. Goldman Sachs, the U.S. investment bank, also lifted its China inflation forecast for 2008 to 6.8 percent from its earlier forecast of 4.5 percent, Chinese state media reported. The Chinese central bank had already announced that M2, a broad measure of total money supply, rose by 18.94 percent in January from a year earlier and was up 2.2 percent from December, 2007.
Journal of Commerce
