CPI Consumer Price Index News
- Inflation may be accelerated on pork
Date: 12-Jun-2007 Sources: (Shenzhen Daily)
CHINA'S inflation probably accelerated in May as pork prices soared, increasing the likelihood that interest rates will be raised.
Consumer prices gained 3.3 percent from a year earlier, according to the median estimate of 19 economists surveyed by Bloomberg News. April's inflation rate was 3 percent, matching the central bank's target for the year. The statistics bureau will release the figures at 10 a.m. today.
Inflation is outpacing after-tax returns on bank deposits, hampering the government's efforts to stem the flow of money into the stock market and avoid a bubble.
'Inflation is breaching the target and putting pressure on the central bank to hike rates,'' said Michael Dai, an economist at Bank of China (Hong Kong) Ltd. 'Huge money inflows from bank deposits to the asset market is not what the government wants to see either.''
Dai expects the central bank to increase lending and deposit rates twice more this year. China's benchmark one-year lending rate is 6.57 percent and the deposit rate is 3.06 percent after increases last month.
The surge in pork prices is likely to push inflation past 4 percent 'very soon,'Hong Liang, an economist with Goldman Sachs Group Inc. in Hong Kong, said in a May 25 note. She raised her forecast for the rise in consumer prices for 2007 to 3.6 percent from 2.6 percent.
Climbing global grain prices have increased the cost of feeding pigs and outbreaks of Blue Ear Disease, or the Porcine Reproductive and Respiratory Syndrome, have curbed supply.
Shoppers lined up for more than a kilometer at a supermarket in Guangzhou last month to buy discounted pork, a staple of the Chinese diet, the Sydney Morning Herald reported. Prices climbed 43 percent in the first three weeks of May from a year earlier.
Food accounts for a third of the consumer price index and meat alone for 7 percent.
'The size of gains on stock markets, as well as the likelihood that food prices will keep consumer price inflation high in coming months has depressed bond prices in anticipation of rate hikes,'' said Mark Williams, Asian economist at London-based Capital Economics Ltd.
M2, the broadest measure of money supply, probably jumped 16.9 percent in May from a year earlier, exceeding the government target for a fourth month, according to the Bloomberg News survey.
China's producer prices may climb 3 percent in May from a year earlier after increasing 2.9 percent in April, the survey showed.
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