China's consumer inflation steady amid firming economy

The Bank of England has forecast inflation reaching 2.7% by the end of 2017 before peaking at 2.8% in the first half of 2018 and easing to 2.4% by 2019

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: 'CPI inflation didn't rise further in March only because the Easter holidays-when transport prices spike-were in late March last year but are in April this year.

Explaining the headline weakness, the NBS said that food prices fell by 4.4% from a year earlier, largely offsetting an increase in non-food inflation of 2.3% over the same period. With annual inflation now running at 2.3%, real income growth is barely positive as average earnings are rising at about the same pace as consumer prices.

Sterling rose momentarily following the announcements before slipping back to a 0.1% drop against the USA dollar at 1.241, and a 0.1% fall versus the euro at 1.170.

In March 2016, consumer price index (CPI)-based retail inflation grew 4.83 percent.

A renaissance in China's steel industry has been a major driver of the world's second-largest economy in recent quarters, helping to generate the strongest profit growth in years and adding to a reflationary pulse being felt across the global manufacturing sector.

On their own, food climbed 0.6 per cent between February and March, while clothing and footwear prices went up by two per cent over the period compared to a one per cent jump past year.

Economists said both the consumer and factory gate inflation were generally stable in March, allowing the People's Bank of China to maintain a relatively tight monetary stance.


The inflation rate for March was also the joint highest figure since September 2013, and above the Bank of England's two per cent target for inflation.

"CPI inflation increased to 5-month high of 3.81 per cent in March 2017, compared to 3.65 per cent in February 2017". British consumers have been the main driver of growth for the United Kingdom economy in recent years and a fall in spending levels could cause a major slowdown in GDP growth at a time when inflation is accelerating, giving the Bank of England limited scope to act.

Fuel pump prices were also dragging on CPI.

Separate ONS figures published earlier this month revealed that household savings rates hit a record low as consumers plundered their nest eggs to keep spending despite rising inflation.

The figures were affected by a drop in food costs, while prices for medical care, housing, education and entertainment, and transportation and communication have increased, Sheng said. Without a significant shift in wage growth this means pay will be falling again in real terms for the first time in three years.

"But we don't think that that will panic the MPC into raising rates imminently".

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