China Inflation Rises to a 19-Month High

China's inflation rose in May amid signs its rebound from the global slump is slowing, adding to pressure on Beijing to keep growth on track and control politically sensitive prices.

Consumer prices rose 3.1 percent from a year earlier, up from April's 2.8 percent rate, the National Bureau of Statistics said. Growth in investment and factory output slowed but still was at double-digit levels.

May inflation was driven by a 6.1 percent rise in food costs, a sensitive issue in a country where some families spend half their incomes on food. Wholesale inflation accelerated to 7.1 percent from April's 6.8 percent rate, suggesting shoppers might face higher prices as retailers pass on rising costs

The strong economic data come despite debt concerns and fiscal austerity measures across Europe, China’s biggest trading partner.

Combined, the figures raised speculation among analysts that the Chinese authorities would have to intensify their efforts to tame the pace of growth and the unwanted side effect of inflation.

Tools at China’s disposal include a gradual rise in interest rates and an appreciation for the renminbi, which has been effectively tied to the dollar since late 2008, at what many observes say is an artificially weak level to help Chinese exporters compete internationally.

The timing of any such policy moves remains unclear, and the Chinese statistics office on Friday stressed that it believed inflation would wane again after rising above the 3 percent mark in May.

China Inflation Rises to a 19-Month High, AP
6/13/2010 3:29:34 PM