China Food-Price Inflation Slows

China's food inflation slowed last month after vegetable supplies recovered from blizzards in January and February and farmers reared more pigs.

The increase of 19.9 percent from a year earlier compared with a 22.1 percent gain in April, the statistics bureau said today. Non-food inflation cooled to 1.7 percent from 1.8 percent.

Overall consumer-price growth slowed to 7.7 percent from the almost 12-year high of 8.5 percent in April, the bureau said, confirming a number disclosed by government officials. The pace is faster than the central bank's target of 4.8 percent for the year, suggesting that it may allow more appreciation of the yuan to cool import costs.

The yuan traded at 6.9059 versus the dollar at 11:06 a.m. in Shanghai today after closing at 6.9184 yesterday. The currency has gained more than 5 percent this year, compared with a 7 percent advance for all of 2007.

The value of China's imports soared 40 percent last month from a year earlier on surging iron ore, crude oil, oil products, coal and soybean prices, the customs bureau said yesterday.

Food makes up about one-third of the consumer-price index. Vegetable and pork supplies are recovering from the blizzards and a hog disease outbreak, according to Paul Cavey, an economist at Macquarie Securities Ltd. in Hong Kong.

Meat prices rose 37.8 percent from a year earlier after a 47.9 percent gain in April. Vegetables rose 10.3 percent after a 13.6 percent increase.

The inflation rate in cities and towns slowed to 7.3 percent in May from 8.1 percent in April, while that in rural areas cooled to 8.5 percent from 9.3 percent, the statistics bureau said.

Producer prices rose 8.2 percent in May, the biggest increase in more than three years, suggesting there's pressure for consumer-price inflation to quicken.

Reconstruction work after the May 12 earthquake in Sichuan province will increase demand for cement, steel, copper, aluminum and other construction materials, adding pressure for more increases, the central bank said in a June 3 report.

China Food-Price Inflation Slows, Bloomberg
6/12/2008 7:42:22 PM