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Growth fails to ease inflation fears
Aggregated Source: Shanghai Daily: Business

SHANGHAI'S industrial production and investment growth picked up in the first two months of this year compared with the same period of last year, but in a tricky development, inflation also shot up to a nine-month high.

The Consumer Price Index, the main gauge of inflation, jumped 2.6 percent on an annual basis in February, the fastest since May, the Shanghai Statistics Bureau said yesterday.

Although Shanghai's inflation was behind the national average of 3.2 percent posted last month, the city should still be on alert, economists said.

"The rate was pushed up mainly due to the Spring Festival holiday, but it cannot be denied that a new round of inflation is forming," said Li Maoyu, an analyst at Changjiang Securities Co.

In the first two months of this year, Shanghai's consumer prices expanded 2.3 percent year on year, less than the country's average of 2.6 percent but moving steadily higher from the 2 percent expansion in the second half of last year.

Food costs, which account for nearly one-third in the CPI basket, rose 5 percent in February as the biggest driver of the current inflation surge.

But Shanghai's industrial production and investment both grew at a faster pace in the first two months, providing room for the city to maneuver between growth and inflation, analysts said.

Industrial production advanced 7.5 percent from a year earlier in the January-February period to 493.6 billion yuan (US$78.3 billion), compared with last year's 0.4 percent fall, the bureau said.

Fixed-asset investment gained 11.4 percent to 63.6 billion yuan in the first two months, also larger than the increase of 3.7 percent recorded last year.

"Shanghai is among the first batch of cities exhibiting signs of recovery," Yan Jun, chief economist at the statistics bureau, said earlier. "It has shown signs of stabilizing - with quality and more efficiency."

Shanghai's economy expanded 7.5 percent in 2012, and the city also targeted a 7.5 percent growth this year.

However, the city's trade plunged 10.9 percent on an annual basis in February.

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