Inflation index may have hit annual peak in July

16:55, August 10, 2010      

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The China Macro Economy Data will be released on August 11 and the Consumer Price Index (CPI), which has been the cause of much concern, may be up by about 3.3 to 3.5 percent compared to the same period of last year, exceeding the warning line of 3 percent. The Producer Price Index (PPI) for China's industrial products may continue to decline.

Industry insiders generally estimated that under the influence of rising prices of agricultural products, the CPI in July may reach the annual peak and rise by about 3.5 percent compared to the same period last year, exceeding the warning line of 3 percent. The CPI will then gradually drop. Meanwhile, the PPI may continue to decline as it is affected by the reduced prices of international commodities.

Relevant monitoring data revealed that the average price of 21 monitored vegetables rose by nearly 12 percent in July, and the grain price was also rising. The price of pork has been rising for seven consecutive weeks and nearly reached the annual high price. Because of the rise in food prices and the influence from floods, analysts all raised their estimation of July's CPI. The estimated rise of the CPI by the institutions in Chinese mainland currently varies from 3.3 to 3.5 percent.

Historical statistics show that in 2010, apart from May in which the CPI rose by 3.1 percent compared with the same period last year, the increasing rate of CPI should remain below the warning line of 3 percent in the rest of the months, with a 2.9 percent rise in June.

The China International Capital Corporation (CICC) estimated that the year-on-year increase in the CPI rate may reach 3.4 percent in July but they do not believe the pressure of short-term rising prices of agricultural products is sufficient enough to lead to continual inflation.

However, it is noteworthy that the vegetable prices contributing largely to the CPI stopped rising and began to drop last week. Statistics from the National Development and Reform Committee revealed that the comprehensive average wholesale price of 24 different vegetables declined nearly 6 percent compared to the same period last year in the major national agricultural products wholesale markets on Aug. 4.

Compared with the rising CPI, analysts estimate that the PPI may continue to drop in July. CICC estimates that the year-on-year increase may drop to 5.2 percent in July under the influence of the declining prices of international commodities.

"It is not unexpected that PPI continues to decline after reaching its peak value in May. Under the influence of the declining prices of international commodities, domestic economic slowdown, and reduced pressure of external imported inflation, the PPI will continue to decline compared with the same period last year." said Tang Jianwei, senior macroeconomics analyst from the Bank of Communications.

By People's Daily Online
Additional support provided by LOTO

(Editor:黄蓓蓓)

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