Chinese inflation was lower than expected at 4.9 percent in the year to January, though price pressures continued to build and will force the central bank to stick to its course of monetary tightening.
Economists polled by Reuters had forecast a 5.3 percent rise in consumer price inflation following a 4.6 percent increase in the year to December.
This is how I see it, though the market cheered on the softer-than-expected CPI market talk: It may provide a false dawn and should be considered with caution mainly because recent indicators and developments still signal that upside risk to inflation persists, said Connie Tse, economist at Forecast PTE in Singapore.
In one sign of the accumulating pressures, the producer price index (PPI) rose 6.6 percent in the year to January, accelerating from an increase of 5.9 percent in the 12 months to December, the agency said. Economists polled by Reuters had expected the PPI to rise 6.1 percent in the year to January.
The National Bureau of Statistics also announced a major adjustment to the way it calculates consumer price inflation.
Housing, clothing and education, among other items, were given larger shares of the new CPI basket, while the weighting of food prices was reduced.
The statistics agency regularly adjusts the composition of the CPI basket, conducting small tweaks every year and a big adjustment every five years. It had been due for the five-yearly major shift.
Many in the market had expected that the re-weighting would lower the CPI on the month, but the statistics agency said such reports were inaccurate. It said the adjustment had actually added 0.024 percentage point to January's reading.
Last week, the central bank raised interest rates for the second time in just over six weeks, indicating that risks are tilting toward more aggressive monetary tightening than investors expect.
Trying to mop up the excess cash in the economy that has fueled inflation, Beijing has also raised banks' required reserves seven times since the start of last year and ordered them to issue less credit.
(Additional reporting by Kevin Yao; Editing by Ken Wills)