China Inflation At 5-Month High

(RTTNews) - China's consumer price inflation rose more than expected to a five-month high in July amid Beijing struggling to kickstart household consumption as the road to achieve about 5 percent growth target remains challenging.

Consumer prices posted an annual increase of 0.5 percent after rising 0.2 percent in June, the National Bureau of Statistics reported Friday. Prices were expected to gain 0.3 percent.

Food prices ended deflation and posted a flat growth in July driven by the 20.4 percent surge in pork prices. Nonetheless, non-food inflation moderated slightly to 0.7 percent.

Data showed that core inflation that excludes prices of food and fuel, eased to 0.4 percent from 0.6 percent in June.

On a monthly basis, the consumer price index logged a 0.5 percent rise, faster than the forecast of 0.3 percent.

Another report from the NBS showed that producer prices decreased for the 22nd consecutive month. Prices fell 0.8 percent annually, the same pace of decline as seen in June. Economists had forecast prices to drop 0.9 percent in July.

The statistical office said that the decline in producer prices was largely due to the lack of market demand and the fall in prices of some international commodities.

ING economist Lynn Song said conditions are in place to push inflation a little higher in the coming months. However, it should not impede further monetary easing, the economist said.

The economist noted that domestic factors continue to favor further monetary policy easing amid low inflation and weak credit activity.

ING expects at least one more rate cut this year with the potential for more if global rate cuts accelerate.