August 2, 2011

 

 

China's Consumer Price Index (CPI), a main gauge of inflation, is likely to slow down in July as pork prices have gone stable after previous hikes and carryover effects have been weakening.

 

The country's inflation escalated to its highest level in three years in June, with the CPI jumping by 6.4% on-year that month. Food prices, which account for nearly one-third of the basket of goods used to calculate the CPI, continued to rise by 14.4% in June on-year.

 

According to the Ministry of Commerce, pork prices have continued to rise since the beginning of July, but the growth rate has been dropping steadily.

 

In the week ending July 24, wholesale pork prices in 36 large and mid-sized cities came to RMB26.11 (US$4)/kg, down 0.2% from a week earlier. This marked an on-week decline for the first time in more than three months.

 

China's pork prices in June jumped 11.4% over the previous month and drove CPI to rise by about 0.36% over a month earlier. Analysts pointed out that the slowdown of pork price rise coupled with smaller carryover effects was creating favourable conditions for the government to check inflation.

 

Meanwhile, grain, egg and aquatic products prices continue to rise moderately and major vegetable prices have mixed performances.

 

In the meantime, carryover factor contributes to a 3.3% rise of CPI in July, down 0.4 points from the preceding month. Experts predicted that CPI will rise 6.2-6.4% on-year in July, with the growth marginally lower than June. Food prices are expected to rise 14% over the same period of last year while energy and metals prices will have strong rising momentum.

 

Analysts said that this round of pork price rise has lasted for about one year and the prices may start to fall from the fourth quarter, adding that on-year growth of CPI may hit a peak in near term.

 

Many experts believed that CPI growth will see a peak in June or July. If the indicator continues to hit a new high in August, there must be a new factor to boost inflation, they added.

 

The National Development and Reform Commission (NDRC) earlier said China's current round of price rises may be close to the turning point according to the usual period of price fluctuation.

 

The State Information Centre said in a report that CPI growth is unlikely to register new high in the second half in consideration of regulative policies, economy and international markets and may maintain in the range of 4.5-5.5%.