Surging food prices to drive CPI in April

By WANG XIAOTIAN (China Daily)
Updated: 2010-05-05 09:32
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BEIJING - Surging food prices and the strong economic rebound may trigger a record surge in China's Consumer Price Index (CPI) during April, analysts said on Tuesday.

The key inflation gauge may increase by around 2.8 percent year on year in April, 0.4 percentage points higher than that of March. During February, the CPI grew by 2.7 percent - the fastest clip in 15 months.

Surging food prices to drive CPI in April

Though the gauge did show a 0.7 percent decline on a month-to-month basis in March, analysts said that it would increase in April.

The National Bureau of Statistics is expected to issue April's economic data on May 11.

Dong Xian'an, chief macroeconomic analyst with Industrial Securities, expects the CPI to rise by 2.8 percent in April, driven by a possible 5.5 percent year-on-year hike in food prices during the same time.

Agricultural food prices rose 5 percent between March 29 and April 25 compared with the same period a year back. The increase was led by a 32.3 percent surge in vegetable prices, and a 4.2 percent and 6.6 percent hike in egg and fishery product prices, according to data from the Ministry of Commerce.

Some analysts said rising pork prices would also spur an increase in the CPI.

Food accounts for 33.2 percent of the CPI pie, with pork accounting for 9.26 percent of the food category.

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Since mid-April, pork prices have shown continual rebound for two weeks with chain gains of 0.2 and 0.5 percent respectively, according to Ministry of Commerce. The pork reserve purchase initiated by the ministry on April 13 is seen as an indicator of continuous price increases in the next few months.

"But the pork price would contribute little in the April data as it slowed by 5.2 percent during the month," said Dong.

He Zhicheng, a senior analyst with Agricultural Bank of China, said the high purchasing price index would also add fuel to the flames, while the conduction effect from the surging producer price index is surfacing gradually.

He said the CPI growth might exceed 3 percent in April and reach 5 percent in the second quarter of 2010.

But not all economists concur with the view. Zhou Mingjian, an analyst with Pacific Securities, said CPI growth would stay between 2.4 to 2.6 percent in April, and will not exceed 3 percent until June due to the relatively high basis in the same period last year.