China's January Inflation Soars to an 11-Year High

Shamia N Irving, Thursday, February 28, 2008, 10:28 pm

Snowstorms that China experienced in January caused inflation to rise to an 11 year high as upward pressures on rising prices strengthened. The main factor pushing consumer inflation to 7.1% in January from 6.5% in December was rising food prices. The percentage in January was the highest year-over-year rate China has witnessed since September 1996, when consumer inflation managed to hit 7.4%. The snowstorm of 2008 was the worst winter in recent years, and the heavy snowfall severely hit food supplies, destroying crops and killing millions of livestock, and sending food costs up 18%. The heavy snow also caused non-food inflation to rise slowly, at an annual rate of 1.5%. However there is one factor that make the information about the snowstorm a little bit hard to interpret. The fact that the New Year fell in Mid-February for the Chinese this year. Being as though prices were expected to rise anyway in the year 2008, it's hard to say if the rise of inflation lies solely on the snowstorm. The snowstorm and the New Year expectations will continue to obscure the issue of what is happening to underlying inflationary pressures. Until the Chinese government knows for sure, Chinese interest rates will be maintained for the next couple of months, and their policies will remain the same.