Consumer inflation in China jumped to the highest level in
nearly 11 years in August as food prices continue to surge, raising
the possibility for another interest rate hike.
The Consumer Price Index (CPI), a barometer of inflation, rose
6.5 percent year-on-year in August after a 5.6 percent increase in
the previous month, the National Bureau of Statistics said Tuesday
in a statement on its website.
The growth beats the six-percent expectation most economists
had, and is well above the official target of three percent for the
whole year.
Meanwhile, the Producer Product Index (PPI), a measure of
inflation at the wholesale level, increased 2.6 percent in August,
0.2 percentage point higher than in July, the bureau said on
Monday.
That marked a reversal from a steady slowdown in PPI in the past
few months, which analysts said indicated that inflationary
pressure is spreading from the consumer sector to other sectors of
the economy.
In a breakdown of August's CPI figures, food prices jumped 18.2
percent year-on-year, while non-food items rose only 0.9 percent,
the statement showed.
Among foodstuffs, meat and meat products reported the biggest
increase, up 49 percent, followed by a 34 percent hike in cooking
oil, and a 23.6 percent rise in eggs. Grain prices went up 6.4
percent.
In July, rural areas saw a 7.2 percent price increase, compared
with 6.2 percent for urban areas, according to the bureau.
From January to August, the CPI growth was 3.9 percent,
according to the bureau.
Central Bank Governor Zhou Xiaochuan expressed his concerns about
inflation on Monday at a meeting in Switzerland. "Curbing inflation
is our objective," he said.
Earlier this month, Zhou said his agency hoped to turn the real
interest rate positive, indicating more interest rate hikes may
come in the next few months.
China has raised interest rates four times so far this year,
with the last one on August 21 when the benchmark one-year deposit
rate rose to 3.60 percent.
However, the return on deposits is still below the inflation
rate, indicating a loss of purchasing power if people put their
money into banks.
That is encouraging an exodus of bank deposits to the country's
red-hot stock market, which has doubled so far this year.
(Chinadaily.com.cn September 11, 2007)