CPI set to rise above 7% on snowstorms

2008-2-14  From Shanghai Daily

Disruptions caused by the recent heavy snowstorm will likely push consumer prices last month to a new high of more than seven percent and hit industrial production, analysts said.

Shen Minggao, an economist with the Citigroup, estimated the consumer price index, a major gauge of inflation, could reach a near-term high of 7.2 percent in January and five to six percent in the first half of the year.

"The transport jam and potential loss of winter crops have driven up the prices of related products, such as edible oil, fruit, aquatic products and vegetables,'' Shen said.

Zhu Jianfang, chief economist with CITIC Securities Co, predicted the CPI may rise more aggressively to 7.4 percent and the figure for the first quarter may touch 7.1 percent.

In November last year, China's consumer prices climbed to an 11-year high of 6.9 percent, trailing the seven-percent figure in December, 1996.

The CPI fell to 6.5 percent in December due to various measures by the government to contain inflation.

However, the unexpected snowstorm, which hit the central and southern parts of China and caused power cuts and traffic snarls, offset measures to cool price increases, particularly of food - the main source of recent inflation.

According to data from the National Development and Reform Commission, pork costs rose 4.53 percent last month from December, while that of beef, mutton and chicken jumped 9.51 percent, 4.36 percent and 1.81 percent respectively from a month earlier.

In Hunan and Guizhou provinces, which were badly hit by the snowstorm, the prices of vegetables soared more than 50 percent compared with the days before the snow.

The National Bureau of Statistics is due to release the January figure for consumer prices next Tuesday.

Meanwhile, industrial output may take a heavy hit from production disruption due to power shortages and transport chaos.

Tao Dong, chief regional economist with Credit Suisse, forecast that growth in industrial production may be one to two percentage points lower.

"It is a big damage, but part of that could be made up for after the Chinese Lunar New Year,'' said Tao.

He also estimated with food prices rising seven to ten percent in most southern cities during the storm period, the inflationary impact is likely to be significant.

But the short term inflationary pressure should fade away soon after the weather stabilizes, he added.