Inflation picks up to multi-year highs in China

 Much of the pick up in consumer prices was likely due to higher food and transportation prices heading into the long Lunar New Year holiday, the National Bureau of Statistics said. Inflation picks up to multi-year highs in China China's producer price inflation picked up more than expected in January to near six-year highs as prices of steel and other raw materials extended a torrid rally, adding to views that global manufacturing activity is building momentum. China consumer inflation also rose more than expected to near three-year highs. Much of the pick up in consumer prices was likely due to higher food and transportation prices heading into the long Lunar New Year holiday, the National Bureau of Statistics said. But mounting price pressures in China and many other developed economies have sparked talk of tighter monetary policy this year, after years of super-loose settings aimed at reviving economic growth. China's central bank raised short-term interest rates in recent weeks as it looks to contain financial risks from an explosive growth in debt.Consumer inflation quickened to 2.5 percent in January from a year earlier, the highest since May 2014 and just above market expectations the consumer price index (CPI) would rise 2.4 percent, versus a 2.1 percent gain in December. Food prices, the biggest component of CPI, rose by 2.7 percent in January from a 2.5 percent rise in December. Transportation and communication costs rose 2.3 percent, up from a 0.9 percent gain in December.

 Producer price inflation accelerated to 6.9 percent, from December's rise of 5.5 percent. The producer price index (PPI) rose the fastest since August 2011, driven by a 31.0 percent increase in mining costs as coal prices rise, the biggest jump in that category since early 2010. The market had expected producer prices to rise 6.3 percent on an annual basis. China's massive imports of coal, crude oil, iron ore and industrial materials have helped fuel a sharp rebound in global resources prices in recent months, boosting profits for producers and processors. Iron ore futures in China rallied to the highest in more than three years on Monday, while London copper futures hit 20-month highs. Price gains in China have been further amplified by government efforts to reduce overcapacity in some industrial sectors. But heady increases in China's commodity futures market, especially for iron ore, metal reinforcing bars and coking coal used in steel production, have added to worries about speculative price bubbles.

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