China CPI 4.9%, PPI 6.6%, Money Supply Up 53% in Two Years

The latest numbers show inflation is soaring out of control in China. The CPI is up 4.9% year-over-year, up from 4.6% in December. The PPI clocked in at 6.6% compared with 5.9% last month.

Things are even worse than they appear at first glance because China manipulated its CPI basket to reduce the impact of soaring food prices. Thus, China's CPI numbers are not directly comparable to previous months.

Please consider China's Inflation Exceeds Target, Adding Rates Pressure

China’s inflation exceeded the government’s 2011 target for a fourth month as prices excluding food rose 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 after a 4.6 percent gain in December, the statistics bureau said in a statement on its website today. Producer-price inflation quickened to 6.6 percent from 5.9 percent.

The acceleration reflects higher rents, a 53 percent surge in money supply the past two years and increasing domestic demand in the world’s second-largest economy.

Food prices 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. Non-food prices rose 2.6 percent from a year earlier.

Under the revised weightings, the food component declined by 2.21 percentage points and clothing, medical costs and telecommunications were also reduced, the National Bureau of Statistics said today, without giving the new weightings. Residence-related charges, which include rent and utility costs, were increased by 4.22 percentage points, the bureau said.

The NBS also revised the calculation of the components of the producer-price index, adding about 2000 products to the basket and adjusting the weightings. The change reduced January’s yearly producer-price inflation by 0.05 percentage points, the bureau said, without disclosing a breakdown of the basket.

If you don't like the number, change the weighting in the basket. To make it easier, China should do what Bernanke does - declare food and energy to be "volatile" - then toss them out of the "core" report altogether.

As I have said many times, those looking for huge inflation can easily find it, not in the US but in China and India.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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