BEIJING • China's consumer inflation quickened last month because of rising food prices, while producer prices declined for the 47th straight month, as falling commodity prices and weak demand add to deflationary pressure in the world's second-largest economy.

The consumer price index (CPI) rose 1.8 per cent in January from a year earlier, slightly less than market expectations and up from a 1.6 per cent increase in December, data from the National Bureau of Statistics showed yesterday.

The slight increase was mainly due to a 4.1 per cent seasonal rise in food prices before the Chinese New Year celebrations, and did not imply any visible improvement in economic activity and broader consumer demand, analysts said.

Non-food consumer inflation remained mild, with an annual growth rate of 1.2 per cent last month, up slightly from December.

The producer price index fell 5.3 per cent in January from a year earlier, slightly less than market expectations and easing from a 5.9 per cent fall in the prior month.

ANZ economists said that "overall, China will likely face strong deflationary pressure in the remainder of the year".

"In addition to the risk of deflation, China continued to face capital outflows in January, as foreign reserves declined further... We maintain our forecast for China to lower the RRR (banks' reserve requirement ratio) by 50 basis points in the first quarter."

Chinese producers have seen their selling prices fall for nearly four straight years, reflecting sliding commodity prices, sluggish demand at home and overseas, and overcapacity in key sectors, including steel and energy.

REUTERS