China's inflation goes up by 2.7% amid econ slowdown

The country's economy could be stabilising as consumer prices held steady last month

China's inflation rose 2.7% year on year in July, signalling that the world's second largest economy could be stabilising as consumer prices held steady last month.

 

China's consumer price index (CPI), a main gauge of inflation, grew 2.7% year on year in July amid rising concerns over slowing down of the world's second largest economy.

 

The National Bureau of Statistics (NBS) which announced the figures attributed the inflation growth mainly to year-on-year rises in food prices, which went up 5% in July.

 

Food prices, which account for one-third of the prices used to calculate the CPI, saw steeper gains than other non-food categories, including clothing, home appliances and daily necessities, it said.

 

The figure was lower than market expectations of an increase of 2.8% and remained well below the government's full-year target of 3.5%, a state-run Xinhua news agency report said.

 

Yu Qiumei, a senior statistician with the NBS, said China's consumer prices have stayed relatively stable.

 

"Compared on a monthly basis, the July CPI grew 0.1% from June and food prices in July also stayed flat from a month ago," Yu said.

 

During the January-July period, inflation rose 2.4%, according to the NBS.

 

A report released today by the Chinese Academy of Social Sciences (CASS) said that 53 of 100 surveyed economists believed inflation would trend up in the remainder of the year, while 40 of the economists said prices will stay generally stable.

 

Lian Ping, chief economist at the Bank of Communications, said inflation will steadily climb, though at a tempered pace, in the next half of the year. He predicted that inflation will rise 2.8% in the next half and 2.6% for the whole year.

 

The NBS data also showed that China's producer price index, which measures inflation at the wholesale level, fell 2.3% year on year in July, marking the 17th straight month of declines.

 

Autumn grain output and pork prices will be important factors affecting inflation, but their prices will not rise dramatically, Liu Chunyuan, associate dean of the School of Economics at Renmin University told Xinhua.

 

Liu said sluggish growth and weak demand will not create a possibility for a sharp inflation rebound.

 

Zhang Liqun, an analyst with the Development Research Centre of the State Council, said the stable inflation level has provided better conditions for growth-stabilizing policies.

 

China's economy has been stuck in a protracted weak recovery, easing to 7.5% growth in the second quarter from 7.7% in the first three months and 7.9% in the final quarter of 2012.

 

According to the CASS survey, 78 of the economists said the current slowdown will continue in the short-term, while 21 of them said growth will further slide.