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China's CPI expected to drop steadily in July

(People's Daily Online)

09:12, July 12, 2012

The latest Consumer Price Index (CPI) makes people feel pleasantly cool in the burning hot summer.

According to the data announced by the National Bureau of Statistics on July 9, the overall CPI of June has an increase of 2.2 percent, set a new low since 29 months.

Some experts pointed out that the latest data indicates that China has made remarkable achievements on control of inflation and stabilization of prices. The achievements are hard won and the CPI is expected to continue to drop in the second half of 2012, which will create favorable conditions for Chinese Government to implement more regulation and control measures on stabilizing economic growth.

The falling of food prices plays a great part in the drop of CPI

The slowing down of the CPI in June was mainly attributed to the falling of the prices of meat and eggs.

According to statistics, the prices of foods increased 3.8 percent in June, causing a rise of about 1.2 percent on CPI year-on-year. Among them, the prices of meat, poultry and foods made from them decreased by 1.7 percent, causing a decline of about 0.13 percent on CPI, the pork price decreased by 12.2 percent, causing a decline of 0.43 percent on CIP, and the price of eggs reduced by 3.6 percent, causing a decline of 0.03 percent on CPI.

In addition, the price of foods in June had a decline of 1.6 percent from the last month, causing a decline of 0.53 percent on CPI from the last month.

The decline of traffic and communication fees is also a reason for the falling of CPI.

The traffic and communication fees of June reduced 0.4 percent year-on-year. Among them, the price of automotive fuels and accessory parts reduced 0.7 percent.

Mei Xinyu, with Chinese Academy of International Trade and Economic Cooperation, said that the seasonal factor has relieved the pressure on CPI and the falling of food prices also played a great part because large quantities of vegetables come into the market in summer and their prices certainly will cheaper than in other seasons.

"The simultaneous decline of the carryover effect and new factors resulting in inflation also played an important role. Judging from the carryover effect, it is a rapidly falling stage from June to September and the average monthly decline will reach 0.4 percent," Lian Ping, the chief economist of Bank of Communications of China, told People's Daily.

“The food prices are major cause influencing the CPI and other varieties in the CPI have a relatively small effect on the CPI and basically remain stable. At present, other factors influencing the CPI also remain stable.”

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