China inflation hits seven-month high in September

People walk past the local government's slogan in Chinese reading: "China My Dream" on Monday, Aug 26, 2013 in Shanghai, China's financial hub. Chinese inflation hit a seven-month high of 3.1 per cent in September, data showed on Monday, with analyst
People walk past the local government's slogan in Chinese reading: "China My Dream" on Monday, Aug 26, 2013 in Shanghai, China's financial hub. Chinese inflation hit a seven-month high of 3.1 per cent in September, data showed on Monday, with analysts warning further upward pressure on prices would restrict the government's options to boost the economy. -- PHOTO: AP 

BEIJING (AFP) - Chinese inflation hit a seven-month high of 3.1 per cent in September, data showed on Monday, with analysts warning further upward pressure on prices would restrict the government's options to boost the economy.

The rise in the consumer price index (CPI), a main gauge of inflation in the world's second-largest economy, was sharply up from the 2.6 per cent logged in August, according to the National Bureau of Statistics (NBS).

It was also ahead of expectations of 2.9 per cent in a poll by Dow Jones Newswires.

A spike in food prices was the main driver of the increase, and authorities blamed national holidays in late September and early October, along with floods and drought in some areas.

Cooling temperatures with the onset of autumn, rising travelling costs and a hike in fuel prices were also factors, NBS analyst Yu Qiumei said in a statement.

In the first nine months of the year, CPI was at 2.5 per cent, the NBS said.

September's CPI was still below Beijing's annual target of 3.5 per cent for this year, but economists warned that inflation was likely to pick up further in the rest of the year, leaving the government little leeway for policy easing.

"CPI inflation will be edging towards the cap at 3.5 per cent and home prices are rising at annual rate around 9.0 per cent," analysts at Bank of America Merrill Lynch in Hong Kong said in a research note.

"We expect Premier Li (Keqiang) will very likely 'taper' his pro-growth rhetoric and will gradually gear towards a more neutral stance," they added.

China is a major driver of the global economy but is coming off its worst annual economic performance since 1999, after gross domestic product (GDP) managed an expansion of just 7.7 per cent last year.

In the final three months of 2012, growth accelerated to 7.9 per cent, but has since slowed to 7.7 per cent in the January-March period and 7.5 per cent in the second quarter.

The government has introduced some measures to stimulate growth since late June, including a mini fiscal stimulus for rail and urban fixed-asset investment, tax cuts and keeping monetary policy loose.

China's producer price index (PPI), which measures goods prices at the factory gate, rose 0.2 per cent month-on-month in September, according to the NBS.

It edged up from 0.1 per cent in August, which was the first increase in six months and came after five months of deflation in producer prices.

The PPI figure "shows that market demand is becoming more active and the macro economy is stabilising and rebounding", Yu said.