Official data now show what we all knew: Bank lending increased sharply in January. Total new loans hit US$203.5 billion, after December’s US$55.6 billion, though the pace of lending slowed toward the end of the month as some banks, facing official disapproval, stopped lending. Strong lending will continue in the coming months – banks have tended to issue loans toward the beginning of the year – but not at the same torrid rate. Overall M2 money supply grew less quickly than in the previous month: 25.98%, to December’s 27.68%.
Consumer price and producer price inflation numbers, also released today, suffer from the same problem as yesterday’s trade figures: The timing of the Lunar New Year distorts them and limits their usefulness. The slower rise in the consumer price index (up 1.5% year-on-year, compared to December’s 1.9% rise) should therefore not be taken as a sign of lessening inflationary pressures.
An inflationary monetary policy and rising producer prices remain concerns over the year – with rising producer prices in particular a concern for manufacturers forced by fierce competition to absorb higher input costs, rather than passing them on to consumers. That will help to keep consumer prices down, but could damage manufacturers’ profitability.