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ECONOMY
Weekly Watch> WEEKLY WATCH NO. 25, 2011> ECONOMY
UPDATED: June 17, 2011 NO. 25 JUNE 23, 2011
CPI and PPI
Share

The consumer price index (CPI), a barometer of inflation, rose 5.5 percent in May from a year ago, a 34-month record high, said the National Bureau of Statistics (NBS).

Among factors in the CPI basket, food prices skyrocketed 11.7 percent year on year while residential costs went up 6.1 percent.

The producer price index (PPI), a measure of inflation at the wholesale level, went up 6.8 percent in April, the same as in the previous month.

China now faces mounting inflation pressures after a severe drought swept through many provinces in May, disrupting agricultural production, said Sheng Laiyun, spokesman of the NBS .

But the impact of the disaster is under control since the country has hefty grain reserves thanks to seven consecutive years of bumper harvests, he said.

Inflation is elevated and will even rise to slightly above 6 percent in June, though the risk for inflation to get out of control is small, said Lu Ting, an economist with the Bank of America Merrill Lynch.

Steadily rising non-food prices, including rising labor costs, suggest inflation could be sticky and structurally elevated at about 4 percent in the next several years, Lu said.

The government has spared no efforts to relieve inflation jitters. On June 14, the People's Bank of China, the central bank, announced to raise the reserve requirement ratio by an additional 0.5 percentage points. It was the sixth such hike this year after six increases in 2010.

Increases in international commodities prices have shown signs of tapering off, which will help tame inflation in China, said Peng Wensheng, chief economist with the Beijing-based China International Capital Corp. Ltd.

But the government is less likely to roll back some of the tightening measures, he said.



 
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