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China's April CPI up 2.8%, further rises expected

Updated: 2010-05-11 09:47
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China's consumer price index (CPI), a main gauge of inflation, increased by 2.8 percent year-on-year in April, the National Bureau of Statistics (NBS) announced today.

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The rise was 0.4 percentage point higher than the previous month, which saw a 2.4 percent increase year-on-year. The CPI dropped 1.5 percent in April last year.

The April CPI figure of this year was consistent with market expectations of growth to be between 2.6 percent and 3 percent. 

The rise challenges the Chinese government's goal of keeping inflation below 3 percent for the whole year.

The CPI rise in April continued the trend since February this year of it exceeding the one-year deposit interest rate in China of 2.25 percent, which will enhance expectations of interest rate rises, analysts said.

Yao Jingyuan, the NBS chief economist, attributed the April CPI growth mainly to rising food prices, particularly of vegetables.

Food prices, which account for about a third of the CPI's weighting, gained 5.9 percent during the month, according to the NBS.

Average vegetable prices in April surged about 25 percent from a year ago, with the wholesale price of garlic skyrocketing more than ten fold from a year earlier to about 12.2 yuan per kilogram at the end of April.

"The government should be vigilant and take action now to prevent the price hikes from spreading to the overall stock of food and commodities," Yao said.

Forecasting the CPI trend for the next three months, Yao said the index level would continue to rise further year on year given the low base rate in 2009.

China is targeting a rise in consumer prices of around 3 percent this year, according to a government work report delivered by Premier Wen Jiabao in March at the annual legislative session.

Yao said it was "difficult but still possible" to keep the country's CPI growth around 3 percent for the whole year.

For the first four months, China's CPI rose 2.4 percent year on year. In April, consumer prices increased 2.7 percent in China's urban areas but that growth was 3.0 percent in the country's rural regions, where spending on food is relatively higher in proportion of household consumption.

China's CPI ended nine months of decline in November of 2009, when it rose 0.6 percent, with the economy continuing to recover since.

The producer price index (PPI), a major measure of inflation at the wholesale level, grew 6.8 percent year on year in China in April and was up 0.9 percentage points from March, according to NBS.

Retail sales, the main gauge of consumer spending, rose 18.5 percent year on year in April, the NBS said.