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Institutions foresee high CPI growth in July

08-02-2010 16:24 BJT

Due to rising vegetable prices after extreme weather events and the low price base in 2009, year-on-year growth of China's consumer price index (CPI) will hit a new high in July, some financial institutions have predicted.

CPI growth may exceed 3.2 percent in July, but there may be a downward trend in the second half of 2010, some analysts said.

China's National Bureau of Statistics will release official economic data on Wednesday.

Li Huiyong, chief macro-economy analyst with Shanghai-based Shenyinwanguo Securities, said that CPI growth in July will hit 3.3 percent. Rising food prices are the main cause, he said.

"PPI hit a record high in the second quarter and started decline, and CPI will peak in the third quarter," Li said.

In the first six months of 2010, CPI increased 2.6 percent year on year.

Data from China's Ministry of Commerce showed food prices have been rising in July. Extreme weather events are considered the reason for the price rally.

"The average rate of inflation for the second half of 2010 will be 3.3 percent," Sun Mingchun, chief economist of Nomura Securities, said.

Meanwhile, most experts agree that China's economic growth will slow down starting in July. They noted that consumption will maintain stable growth, while exports will still be recovering and the downward trend of investments will start to reverse.

Lu Zhengwei, a senior economic with Industrial Bank said that urban fixed-asset investment will stop falling in the second half this year. And the industrial added value may rebound in July after three consecutive months of decline.

Facing a slowdown of economic growth and a record high CPI, experts noted that China will maintain a stable policy environment, and the possibility of austerity measures is low.

Editor:Xiong Qu |Source: People's Daily

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