China's producer prices climbed 6.1 percent in January from a year earlier, the fastest in three years, adding pressure on the nation's efforts to curb inflation.
Producer price index (PPI), a leading indicator for consumer price index (CPI), measures the average change in the prices received by producers for their output, therefore reflecting potential inflationary trends, if any.
The January gain follows a 5.4 percent rise in December and an increase of 3.1 percent for 2007, according to the National Bureau of Statistics.
Prices of raw materials, fuel and power showed strong growth momentum, increasing 8.9 percent year-on-year, according to the statistics bureau.
Prices of crude oil rose 29.9 percent in January, while those of steel products were up by as much as 28.6 percent. Meanwhile, prices of daily necessities from food to consumer durables went up 4.6 percent year-on-year.
"PPI growth will further increase the inflationary pressure in the next two or three months," said Chen Jijun, a Beijing-based analyst with CITIC Securities. "And curbing inflation will still remain a challenge for policymakers."
China's consumer prices are hovering at 11-year highs, hitting 6.5 percent last December. The People's Bank of China raised interest rates six times last year and required lenders to set aside more cash in deposits on 10 occasions, trying to slow the economy and curb inflation.
Analysts say the consumer price index could hit a new record in January due to strong demand during the lunar new year. Meanwhile, the heavy snowstorm, which hit much of China and caused supply shortages of food and power in some areas, is also expected to add to inflationary pressures.
According to Wang Tao, an economist with Bank of America, the CPI for January would jump to 7 percent or higher.
Ma Jun, an economist from Deutsche Bank, said inflation is likely to hit two or three new highs in the first quarter and exceed 8 percent year-on-year in March.
"The central bank may raise the interest rate one time in the first quarter if the inflation worsens," said Wang. "But the government is likely to ease the tightening measures in the second half of the year as the nation's exports may start to decline due to a slowdown in the US economy."
The NBS is scheduled to release the benchmark consumer price index for January today.
Source:China Daily
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