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China's inflation hits 3.1% in May
By Wang Yanlin |
June 11, 2010, Friday
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Online Edition
Online Edition
CHINA'S inflation in May rose to the quickest pace in 19 months but analysts said that signs of a cooling economy reduced the possibility of an immediate interest rate increase.
The Consumer Price Index, the main gauge of inflation, gained 3.1 percent from a year earlier last month, up from the 2.8 percent rise in April, the National Statistics Bureau said today.
The figure has jumped above the nation's target line of controlling inflation within 3 percent for this year, and has sustained growth for a seventh month.
"Inflationary pressure is increasing," said Li Huiyong, an analyst at Shenyin & Wanguo Securities Co. "To deal with rising prices should be the top priority for the policy makers."
Li said an interest rate increase is necessary to ease the expectation of an inflationary spiral.
However, other analysts said the upsurge in CPI was mainly driven by higher food costs after bad weather earlier this year.
"The price rises may moderate in July and even fall in the following months," said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges, a top think tank. "That's because the food costs will be tamed after production of agricultural products normalizes and the effect of last year's loose credit policy will gradually fade."
In Zhang's opinion, the Producer Price Index, the factory gate measurement of inflation and a harbinger for future CPI growth, reached a peak last month when it climbed 7.1 percent on an annual basis.
Li Maoyu, an analyst at Changjiang Securities Co, said the signs of a cooling economy and the uncertainties spurred by the European debt crisis have made an immediate interest rate increase less possible.
"An interest rate rise will work directly on investment growth, which may disturb economic growth when there are so many uncertainties around," Li said.
Last month, China's industrial production grew 16.5 percent year on year, down 1.3 percentage points from that in April. Urban fixed-asset investment advanced 25.9 percent in the first five months to 6.73 trillion yuan (US$985 billion), also easing from the growth of 26.1 percent through April.
Last month's data set laid the foundation for China to retreat from the risk of overheating.
China's gross domestic product jumped 11.9 percent in the first quarter, the fastest pace in more than two years. Some analysts predicted the growth rate in the second quarter may moderate to 10.7 percent, based on tighter monetary policies and fewer credit loans compared with last year.
The Consumer Price Index, the main gauge of inflation, gained 3.1 percent from a year earlier last month, up from the 2.8 percent rise in April, the National Statistics Bureau said today.
The figure has jumped above the nation's target line of controlling inflation within 3 percent for this year, and has sustained growth for a seventh month.
"Inflationary pressure is increasing," said Li Huiyong, an analyst at Shenyin & Wanguo Securities Co. "To deal with rising prices should be the top priority for the policy makers."
Li said an interest rate increase is necessary to ease the expectation of an inflationary spiral.
However, other analysts said the upsurge in CPI was mainly driven by higher food costs after bad weather earlier this year.
"The price rises may moderate in July and even fall in the following months," said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges, a top think tank. "That's because the food costs will be tamed after production of agricultural products normalizes and the effect of last year's loose credit policy will gradually fade."
In Zhang's opinion, the Producer Price Index, the factory gate measurement of inflation and a harbinger for future CPI growth, reached a peak last month when it climbed 7.1 percent on an annual basis.
Li Maoyu, an analyst at Changjiang Securities Co, said the signs of a cooling economy and the uncertainties spurred by the European debt crisis have made an immediate interest rate increase less possible.
"An interest rate rise will work directly on investment growth, which may disturb economic growth when there are so many uncertainties around," Li said.
Last month, China's industrial production grew 16.5 percent year on year, down 1.3 percentage points from that in April. Urban fixed-asset investment advanced 25.9 percent in the first five months to 6.73 trillion yuan (US$985 billion), also easing from the growth of 26.1 percent through April.
Last month's data set laid the foundation for China to retreat from the risk of overheating.
China's gross domestic product jumped 11.9 percent in the first quarter, the fastest pace in more than two years. Some analysts predicted the growth rate in the second quarter may moderate to 10.7 percent, based on tighter monetary policies and fewer credit loans compared with last year.
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