After lots of news about inflation in India, Brazil, Indonesia, and the European Union, this week we’ll get new inflation numbers from the United States and China.
China is scheduled to release inflation numbers for January on Tuesday, February 15. After running at a 5.2% annual rate in November, inflation fell to a 4.6% rate in December. The consensus is that inflation will rebound after that December decline but there’s disagreement on the size of the pickup. The consensus among economists points to a 5.3% inflation rate but a significant majority of traders thinks there’s a good chance that the rate will come at 4.9%. The National Bureau of Statistics is expected to reduce the weighting for food in China’s inflation numbers in January as part of its regular five-year adjustment to the way it calculates inflation. With food prices racing ahead of inflation in other sectors in China, a reduction in the weighting of food prices in the index would lower the overall inflation rate. The chance that this kind of technicality would convince anyone of a change in inflation would seem low except that traders were pointing to this thinking as a reason that stocks rallied in China on February 14. Stocks were up 0.8% in Hong Kong and 1.75% in Shanghai.
U.S. inflation figures are scheduled for release on Thursday, February 17. In December the Consumer Price Index moved up 0.5%, the biggest monthly gain since July 2009. But the move was driven almost entirely by a 4.6% gain in energy prices. Energy prices accounted for 0.4 percentage points of the 0.5% gain in the CPI. Stripping out energy and food prices, the core inflation rate hardly budged, rising just 0.1%.
The consensus among economists is calling for more of the same in the January numbers with the headline CPI projected to climb 0.3% and core inflation to show a 0.1% increase. Nothing there to change Federal Reserve policy or to roil the U.S. stock market.
China’s Inflation Exceeds Target, Adding Rates Pressure
http://www.bloomberg.com/news/2011-02-15/china-s-january-consumer-prices-increase-4-9-producer-prices-climb-6-6-.html
China’s inflation exceeded the government’s 2011 target for a fourth month as prices excluding food rose by the most in at least six years, escalating pressure on the central bank to keep raising interest rates.
Consumer prices rose 4.9 percent last month from a year earlier, the statistics bureau said in a statement on its website today. That compared with a 4.6 percent gain in December and the median forecast of 5.4 percent in a Bloomberg News survey of 27 economists. Producer-price inflation accelerated to 6.6 percent from 5.9 percent in December.
A drought in wheat-growing regions, rising global commodity prices and a 53 percent increase in money supply in two years are adding to price pressures in the fastest-growing major economy. Officials may frontload policy tightening in the first half of the year as inflation remains elevated, according to economists from JPMorgan Chase & Co. and Morgan Stanley.
“All these numbers indicate that inflationary pressures have not abated and China has already entered into an era of structural inflation,” said Liu Li-gang, an economist at Australia & New Zealand Banking Group in Hong Kong. “This indicates more monetary policy tightening ahead.”
The statistics bureau said that a reweighting of the consumer-price index, including cutting the contribution from food, boosted the headline rate by 0.024 percentage point. Mizuho Securities Asia Ltd. disagreed, saying that without the change the number may have been 5.1 percent.
Stocks Rise
The benchmark Shanghai Composite Index rose 0.6 percent as of the 11:30 a.m. break in trading after today’s inflation number matched speculation yesterday.
Non-food prices rose 2.6 percent from a year earlier. The government is targeting 4 percent inflation this year, state television reported in December.
“The driver of the below-consensus reading is the smaller- than-expected increase in food prices,” said Lu Ting, a Hong Kong-based economist with Bank of America Merrill Lynch.
Food climbed 10.3 percent last month from a year earlier, according to today’s report, after gaining 9.6 percent in December. Vegetable prices jumped 2 percent, fruit prices surged 35 percent and grain rose 15 percent, according to the statement.