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July sees China's inflation peak to 6.5%, fed by soaring food costs
By Wang Yanlin |
August 9, 2011, Tuesday
|
Online Edition
Online Edition
CHINA'S inflation accelerated to a 37-month high in July on surging food costs, making it more difficult for policymakers to balance between price control and economic growth.
But some analysts said July's figure would be the peak in this round of inflation, and policies couldn't be tightened further amid worsening global liquidity.
The Consumer Price Index, a main gauge of inflation, soared 6.5 percent from a year earlier last month, the National Bureau of Statistics said today.
It compared with June's pace of 6.4 percent, and increased 0.5 percent on a month-on-month basis.
China's inflation rates exceeded the government control target of 4 percent in each of the first seven months.
"July's rise was higher than our expectation," said Jing Ulrich, managing director at J.P. Morgan. "But we still think it was the peak and prices will grow slower in the coming months with stabilizing pork supply and falling commodity prices on a weak global market."
Food costs, which fueled the inflation, jumped 14.8 percent year on year in July, accelerating from June's 14.4 percent. Pork prices continued to climb with an annualized growth of 56.7 percent, but eased from June's pace of 57.1 percent.
Lian Ping, chief economist at the Bank of Communications, said there had been signs of easing inflationary pressure and policymakers should give up plans of more monetary tightening.
"Inflation rate may start to moderate next month and return to around 4 percent at the year-end," Lian said. "China's tightening policies have yet to take full effect, so there is no need to make further moves such as another interest rate increase, especially in a market already short of liquidity."
China has lifted the interest rates three times this year and the reserve requirement ratio six times to curb a stubbornly high inflation.
Such a tightening stance has made it difficult for companies to get loans, especially for small and medium-sized enterprises which see credit as their lifeline.
The external economic climate only made matters worse. The United States seemed unlikely to end its quantitative easing polices anytime soon, and may continue to pour its capital into emerging markets like China to benefit from rising interest rates and stronger currencies.
But some analysts said July's figure would be the peak in this round of inflation, and policies couldn't be tightened further amid worsening global liquidity.
The Consumer Price Index, a main gauge of inflation, soared 6.5 percent from a year earlier last month, the National Bureau of Statistics said today.
It compared with June's pace of 6.4 percent, and increased 0.5 percent on a month-on-month basis.
China's inflation rates exceeded the government control target of 4 percent in each of the first seven months.
"July's rise was higher than our expectation," said Jing Ulrich, managing director at J.P. Morgan. "But we still think it was the peak and prices will grow slower in the coming months with stabilizing pork supply and falling commodity prices on a weak global market."
Food costs, which fueled the inflation, jumped 14.8 percent year on year in July, accelerating from June's 14.4 percent. Pork prices continued to climb with an annualized growth of 56.7 percent, but eased from June's pace of 57.1 percent.
Lian Ping, chief economist at the Bank of Communications, said there had been signs of easing inflationary pressure and policymakers should give up plans of more monetary tightening.
"Inflation rate may start to moderate next month and return to around 4 percent at the year-end," Lian said. "China's tightening policies have yet to take full effect, so there is no need to make further moves such as another interest rate increase, especially in a market already short of liquidity."
China has lifted the interest rates three times this year and the reserve requirement ratio six times to curb a stubbornly high inflation.
Such a tightening stance has made it difficult for companies to get loans, especially for small and medium-sized enterprises which see credit as their lifeline.
The external economic climate only made matters worse. The United States seemed unlikely to end its quantitative easing polices anytime soon, and may continue to pour its capital into emerging markets like China to benefit from rising interest rates and stronger currencies.
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