China's monthly inflation slows; food prices up 20 per cent (Roundup)

Business News

Jun 12, 2008, 8:50 GMT

Beijing - Soaring food costs kept China's monthly consumer price inflation at close to 8 per cent in May, but a small decline from April was expected to continue for the next few months, the government said on Thursday. The consumer price index (CPI) jumped 7.7 per cent year-on-year in May, fuelled mainly by a rise of 19.9 per cent in food prices compared with May 2007, the National Bureau of Statistics said. The figure was down marginally from the 8.5-per-cent rise in the CPI in April and the 12-year high of 8.7 per cent in February. The increase in food prices was also down slightly from 22.1 per cent in April, but the price of pork was 48 per cent higher than in May 2007 while the price of cooking oil was up 41 per cent, the bureau said. It said the CPI rose 8.1 per cent year-on-year form January to May, making it extremely unlikely that the government will meet its target of holding annual inflation to 4.8 per cent this year. Inflation in poor rural areas continued to outstrip urban inflation, rising 8.5 per cent in May compared with 7.3 per cent in urban areas, the bureau said. The minor drop in the rate of inflation failed to bolster China's two stock markets, with the key Shanghai Composite Index losing 2.2 per cent and the smaller Shenzhen Component Index closing down more than 1 per cent lower on Thursday. Yin Jianfeng, an economist at a government think-tank, told the official Xinhua news agency that international grain and oil prices were a major factor behind China's long-term inflation. 'Food prices on the world market are the highest in 30 years,' Yin told the agency. 'Surging crude oil prices and a weakening US economy also brought pressure to the domestic market,' he said. But Yin said he expected a decline in inflation and that high food prices were 'not expected to last long.' 'China's economy will in turn improve, and the inflation may certainly ease,' he was quoted as saying The government has raised the bank reserve ratio several times this year, imposed controls on some food prices, and taken other measures aimed at reining in investment and inflation.

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China's monthly inflation slows; food prices up 20 per cent (Roundup)

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