Consumer prices rose 4.1 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the median estimate of 4 percent in a Bloomberg News survey of 26 economists and 4.2 percent in November.

Today’s data may allow Premier Wen Jiabao to proceed with a shift in policy focus to bolstering expansion as Europe’s debt crisis crimps overseas demand and officials sustain a campaign to cool property prices. Imports and exports increased the least in two years last month, excluding seasonal distortions, and a report next week may show the world’s second-largest economy expanded at the slowest pace in 10 quarters.

“Inflation will no longer be a constraint on policies and officials will look more to other economic data to decide if there is a need to ease policies,” said Ken Peng, a Beijing- based economist with BNP Paribas SA, the only bank to correctly forecast the inflation reading. “Still, policy makers may remain wary of inflation for a while because the number still exceeded the yearly target.”

Stocks in China reversed declines after the report. The benchmark Shanghai Composite Index rose as high as 0.6 percent and was trading little changed at 10:36 a.m. local time.

Inflation Target

For the whole of 2011, consumer prices gained 5.4 percent, exceeding the government’s target of 4 percent set at the beginning of the year. Policy makers haven’t yet published an inflation goal for this year. Economists’ forecasts released last month ranged from 2 percent at Standard Chartered Plc to 4.4 percent at Credit Suisse Group AG.

Gains in food prices accelerated to 9.1 percent in December from a year earlier, as vegetable and seafood costs climbed, today’s report showed. Non-food prices increased at the slowest pace in a year.

Inflation may see a “one-off” rebound this month amid increased consumer spending before the Chinese Lunar New Year holiday and winter disruptions to food supplies, according to Lu Ting, a Hong Kong-based economist at Bank of America Corp. Wholesale prices of 18 vegetables tracked by the Ministry of Commerce continued to climb in the first week of January from the previous seven days, after rising throughout December, according to government data.

Reserve-Ratio Cuts

China’s economic growth may have slowed to 8.7 percent from a year earlier in the fourth quarter of 2011, according the median estimate of 24 economists in a Bloomberg News survey. The data is due for release on Jan. 17. UBS AG estimates the pace of expansion may slow to 7.7 percent this quarter.

The People’s Bank of China cut banks’ reserve requirement ratio last month, the first since 2008, to encourage lending. BNP estimates four to five reductions this year with the first probable after the Lunar New Year holiday that starts Jan. 23. The bank sees inflation averaging 3.6 percent this year.

Easing global commodity prices have helped cool raw material costs in China, the world’s largest consumer of iron ore and copper. Producer prices rose 1.7 percent in December from a year earlier, today’s report showed, in line with the median estimate in a Bloomberg survey, after a 2.7 percent gain the previous month.

Prices Too High

While controlling inflation is not as urgent a task as it was last year, stabilizing consumer prices is still high on the government’s agenda and efforts to rein in excessive gains won’t be relaxed, People’s Bank of China Governor Zhou Xiaochuan said in interviews with Caixin magazine and the Xinhua News Agency over the past two weeks. More than two thirds of households in a central bank survey last month said prices are too high.

Factory workers from lingerie maker Top Form International Ltd.’s Shenzhen plant to Pangang Group Chengdu Steel Vanadium & Titanium Co. in western China have gone on strike for higher pay in the past two months. LG Display Co. (034220), agreed to double year- end bonuses last month in eastern China’s Nanjing plant after more than 2,000 workers took part in a protest, the state-run Xinhua News Agency reported Dec. 29.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

http://www.bloomberg.com/news/2012-01-12/china-s-inflation-cools-for-fifth-month-may-presage-more-policy-easing.html

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