China stuck in inflation policy bind as CPI jumps
CPI jumps 2.7 per cent to four-month high in June, and more modest rises are expected
Consumer inflation on the mainland rebounded to a four-month high last month, but deflation still dogged the factory sector, with sluggish industrial demand restricting the government's policy options.
Analysts widely believe price pressures may rise modestly in the months ahead but not enough to prompt a big shift in policy, as Beijing tries to balance curbing financial risks with bolstering a so far lacklustre economic recovery.
The consumer price index rose 2.7 per cent from a year earlier, accelerating from a rise of 2.1 per cent in May, the National Bureau of Statistics said yesterday.
Inflation was driven by a 4.9 per cent gain in food prices. The jump was partly a result of a low comparison base for the index in June last year, when inflation sank to a 28-month low of 2.2 per cent.
The producer price index, an advance indicator of consumer inflation, remained in a deflationary channel because of overcapacity and easing raw material costs. It fell 2.7 per cent from a year earlier and 0.6 per cent from May.
Headline inflation rates should remain muted and would not pose a hurdle to policy easing, said Yao Wei, an economist at Societe Generale.