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China's inflation rises, but economists optimistic

China's consumer price index (CPI), a main gauge of inflation, grew 2.7 % year on year in July, staying flat from June, the National Bureau of Statistics (NBS) announced Friday.

india Updated: Aug 09, 2013 16:36 IST

China's consumer price index (CPI), a main gauge of inflation, grew 2.7 % year on year in July, staying flat from June, the National Bureau of Statistics (NBS) announced Friday.

The figure was lower than market expectations of an increase of 2.8 % and remained well below the government's full-year target of 3.5 %, reported Xinhua.

The NBS data also showed that China's producer price index, which measures inflation at the wholesale level, fell 2.3 % year on year in July, marking the 17th straight month of declines.

The NBS attributed the inflation growth mainly to year-on-year rises in food prices, which went up 5 % in July.

Food prices, which account for one-third of the prices used to calculate the CPI, saw steeper gains than other non-food categories, including clothing, home appliances and daily necessities.

Yu Qiumei, a senior statistician with the NBS, said China's consumer prices have stayed relatively stable.

"Compared on a monthly basis, the July CPI grew 0.1 % from June and food prices in July also stayed flat from a month ago," Yu said.

During the January-July period, inflation rose 2.4 %, according to the NBS.

A report released Friday by the Chinese Academy of Social Sciences (CASS) said that 53 of 100 surveyed economists believed inflation would trend up in the remainder of the year, while 40 of the economists said prices will stay generally stable.

Lian Ping, chief economist at the Bank of Communications, said he believes inflation will steadily climb, though at a tempered pace, in the next half of the year. He predicted that inflation will rise 2.8 % in the next half and 2.6 % for the whole year.

Autumn grain output and pork prices will be important factors affecting inflation, but their prices will not rise dramatically, said Liu Chunyuan, associate dean of the School of Economics at Renmin University.

Liu said sluggish growth and weak demand will not create a possibility for a sharp inflation rebound.

Zhang Liqun, an analyst with the Development Research Center of the State Council, said the stable inflation level has provided better conditions for growth-stabilizing policies.

China's economy has been stuck in a protracted weak recovery, easing to 7.5-% growth in the second quarter from 7.7 % in the first three months and 7.9 % in the final quarter of 2012.

According to the CASS survey, 78 of the economists said the current slowdown will continue in the short-term, while 21 of them said growth will further slide. However, the economists were generally optimistic about the economy's development in the long-term.

The Political Bureau of the Communist Party of China (CPC) Central Committee pledged at a meeting held last month to keep the economy growing steadily in the second half of the year while promising to fine-tune policies when necessary.

The comments were seen as a reaffirmation that a stable environment is necessary for pushing ahead with reforms for long-term sustainable growth.

Official data released last week showed that the manufacturing sector expanded in July from a month ago.

Customs data released Thursday showed that foreign trade grew 7.8 % in July after a 2-% fall in June.