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Food costs to fuel CPI above 3 percent annual target

By ()
Updated: 2007-06-21 16:02

Rising food prices will probably fuel China's inflation to climb above the government's annual target of three percent this year, according to an official report.

The Consumer Price Index, a broad indicator of the nation's inflation, is likely to grow around 3.3 percent, said the State Information Center - a research unit of the National Development and Reform Commission.

The estimated rise outstrips the 1.5 percent jump for last year.

"Consumer inflation in 2007 is mainly fueled by an increase in food prices, which results from higher costs of grain, meat, poultry and eggs," said the think tank.

Consumer prices accelerated 3.4 percent in May from a year earlier, the highest level in more than two years, the National Bureau of Statistics said last week. The combined growth for the first five months was 2.9 percent, almost the same as the central bank's annual target this year.

Food prices, making up one-third of the CPI basket, jumped 8.3 percent year on year last month, accelerating from the 7.1 percent increase in April. Costs of eggs surged 37.1 percent year on year while those of meat and poultry soared 26.5 percent, driven by rising feed prices.

The report said the rise in the costs of meat and other foods won't slow until the fourth quarter because of high grain and cereal prices.

But there was some good news as apart from food costs, the inflation pressure is under control, according to the report. Costs of industrial products won't rise significantly as higher output efficiency offsets the growing costs of labor in China.

Besides, tightening monetary policies and a stronger yuan are expected to cool inflation, the report said. The central bank has raised borrowing costs four times and ordered lenders to set aside more money as reserves since the middle of last year to drain cash from the financial system.


(For more biz stories, please visit Industry Updates)


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