| Inflation still races despite state efforts |
SHANGHAI, Aug 4 -- GROWTH in China's inflation last month may have jumped to the highest in almost three years despite government austerity measures to stem consumer prices, an economist at Goldman Sachs Group Inc said yesterday.
The consumer price index, the main gauge of inflation, likely climbed 5.1 percent in July, the biggest growth since October 2004, said Liang Hong, an economist at the United States investment bank.
Prices in June surged 4.4 percent from a year earlier, posting the highest in almost three years, driven by an 11.3-percent increase in food costs.
"We now see significant risk of CPI inflation breaching the five percent level in the near term," said Liang.
"Inflation is spreading from primary agricultural products to other consumer goods with accelerated speed."
Consumer prices have picked up since the end of last year, led by an increase in food costs including meat and eggs.
The National Development & Reform Commission has already reported that pork prices rose by a further 12.3 percent in June from a month earlier based on its monthly survey. In addition, corn prices rose three percent month-on-month in June, according to China's corn exchange, and the Ministry of Agriculture reported that the agriculture wholesale price index was up about five percent in June from the previous month.
"We expect the inflation to breach the central bank's three-percent annual target for this year and there is still room for a further interest rate hike to tighten money supply," said Zhang Yang, an analyst at Orient Securities Co.
Zhang forecast a 4.7-percent gain in July's inflation.
The central bank last month raised interest rates for the third time this year to curb rising prices. The National Bureau of Statistics is scheduled to release the July figures on August 13.
"If inflation breaches five percent with an accelerating upward momentum, the debate on whether China is overheating will likely soon be overtaken by concerns about whether the economy will have a soft, hard, or 'not-so-soft' landing," Liang said, adding the risks of sharp monetary tightening have risen.
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