China inflation hits 8-month high amid tightening fear


* October CPI rises 3.2 pct yr/yr, vs forecast 3.3 pct

* October factory output up 10.3 pct vs forecast 10 pct

* Jan-Oct fixed-asset investment rises 20.1 pct

* Data comes as top leaders discuss reform plans

By Xiaoyi Shao and Kevin Yao

BEIJING, Nov 9 (Reuters) - China's annual inflation climbedto an eight-month high of 3.2 percent in October as food costssoared, fanning market worries about policy tightening asfactory output and investment data pointed to signs ofstabilisation in the economy.

Inflation, which quickened slightly from 3.1 percent inSeptember, was still lower than a median forecast of 3.3 percentin a Reuters poll and was below the official target of 3.5percent for 2013.

"Although the CPI inflation was mainly pushed up by seasonalfood demand, it may fuel market concerns that the central bankmay tighten monetary conditions," said Li Huiyong, an economistat Shenyin & Wanguo Securities in Shanghai.

The People's Bank of China refused to inject liquidity intothe money markets during regular open market operations onThursday, triggering worries it would start a new round oftightening in the next few months, traders said.

Data on Friday showed exports rebounded by more thanexpected in October, adding to signs the economy has found itsfooting as Beijing prepares its reform agenda for the nextdecade.

But few analysts believe the central bank will rush totighten policy amid the lingering global uncertainties.

The PBOC has said it will maintain its prudentpolicy-setting with timely fine-tuning to keep the economy on aneven keel while warding off inflationary risks.

The National Bureau of Statistics said food prices rose 6.5percent in October from a year earlier, quickening from 6.1percent in September.

China's producer prices fell 1.5 percent last month from ayear earlier - the 20th consecutive month of decline - versus afall of 1.3 percent the previous month, the bureau said.

Economists polled by Reuters had expected consumer inflationof 3.3 percent and factory-gate prices to decline 1.4 percent.

Month-on-month, consumer prices were up 0.1 percent versus arise of 0.2 percent expected by economists. Producer prices inOctober were unchanged from the previous month.


Data from the National Bureau of Statistics also showedChina's factory output rose 10.3 percent in October from a yearearlier, beating market expectations of 10 percent.

Fixed-asset investment, a key driver of economic growth,climbed 20.1 percent in the first 10 months from a year earlier- in line with forecasts. Real estate investment growth rose19.2 percent, while revenue from property sales rose 32.3percent.

Retail sales, a key gauge of consumption, were up 13.3percent in October from a year earlier, versus 13.4 percentexpected by the market.

"Overall, the data showed that economy is stabilising butthere are still many external uncertainties," said Chen Letian,an economist at Rising Securities in Beijing.

"We don't expect the central bank to tighten policy sharply,although it may fine-tune policy by targeting market liquidity."

A Reuters poll showed annual growth could slow to 7.5percent in the fourth-quarter of 2013 from 7.8 percent in theprevious three months. The full-year growth could be 7.6 percent- the weakest in 14 years - but ahead of the government's targetof 7.5 percent.

Chinese leaders began a four-day secret meeting on Saturdayto set a reform agenda for the next decade as they try to pushmore sustainable growth after three decades of breakneckexpansion.

They have pledged to steer the economy away from itsdependence on investment and exports to one driven more byconsumption, services and innovation, which they consider moresustainable.

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