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Rebound in inflation forecast

By Li Qiaoyi (Global Times)

09:39, July 02, 2013

China's inflation is likely to have seen a modest rebound in June, according to forecasts by research agencies ahead of the official announcement of the figure next week, but economists said Monday there will not be further inflationary pressure amid a cooling economy.

The consumer price index (CPI), a main gauge of inflation, is expected to rise to 2.6 percent for June, driven by rising pork prices and a low base of comparison last year, Tang Jianwei, a senior macroeconomic analyst at Bank of Communications, told the Global Times Monday.

In May, the CPI reading rose by 2.1 percent compared to a year earlier, according to data from the National Bureau of Statistics (NBS).

Bank of Communications is one of a number of research agencies that have recently forecast a bounce in the June CPI reading, which is due to be announced by the NBS on July 9.

Wuhan-based Changjiang Securities said in a research note released Thursday that it expects the June CPI to hit 2.6 percent, and Shanghai-based Shenyin & Wanguo Securities said in a note on Friday that the reading is likely to be 2.3 percent in June.

However, Tang said there are unlikely to be any short-term problems with inflationary pressure, as the slow economic recovery and the central bank's prudent monetary policy leave no room for obvious price hikes in months to come.

Despite forecasting a mild upward trend in the overall price level in the second half of 2013, Bank of Communications lowered its full-year CPI forecast to 2.6 percent from the previous 2.8 percent, which Tang said indicates a weaker demand outlook amid the new government's focus on economic restructuring.

"Some months may see rising CPI readings, but inflation won't be a concern for the Chinese economy this year," Yang Weixiao, a senior macroeconomic analyst with Lianxun Securities Co, told the Global Times Monday.

Meanwhile, economists said that some industrial enterprises are actually facing deflationary risks amid the slowing economy.

The producer price index (PPI), a gauge of inflation at the wholesale level, has been in negative territory since March 2012.

The PPI reading is expected to continue showing negative growth in June according to research agency forecasts, with the announcement Monday of economic indicators strengthening this outlook.

The official purchasing managers' index (PMI) for June was down 0.7 points from the previous month to 50.1, the NBS reported Monday, and the sub-index measuring input prices dropped by 0.5 points to 44.6 in June.

But Tang said the falling PPI growth is not associated with the CPI growth trend. "China has yet to see CPI deflation risks," Tang said.

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