July 8, 2008 / 5:28 AM / 11 years ago

China's June inflation eases to 7.1 pct: sources

BEIJING (Reuters) - China’s annual consumer price inflation eased to 7.1 percent in June from 7.7 percent in May, two government sources familiar with the data said on Tuesday.

A woman at a supermarket in Shanghai January 3, 2008. China's annual consumer price inflation eased to 7.1 percent in June from 7.7 percent in May, two government sources familiar with the data said on Tuesday. REUTERS/Aly Song

A 7.1 percent reading would be a relief to policy makers, who have identified inflation as their biggest economic headache.

It would mark the second straight month of easing consumer inflation. The May reading of 7.7 percent was down from 8.5 percent in April.

One of the sources said that for the first six months as a whole, consumer prices were 7.9 percent higher than a year earlier — well above the government’s official full-year target of 4.8 percent.

The source added that the increase in the producer price index in June was “still high”, but did not elaborate.

Factory gate inflation has been steadily increasing over the last several months, reaching an annual 8.2 percent in May. Many economists say this suggests significant inflationary pressures are building up in the production pipeline.

The data could still be subject to last-minute revisions, the sources said. They declined to be named as they are not authorised to speak to the media.

Although Beijing has emphasized the inflation fight as a top priority, a number of government economists have begun to caution about the need to avoid taking steps that could lead to a serious slowdown in growth.

Wang Jian, secretary-general of the China Society of Macroeconomics, added his voice to that chorus on Tuesday.

“Maintaining economic growth should be our priority when most of the price rises are caused by production costs,” Wang wrote in the official China Securities Journal. “Sound economic growth will equip residents well to fight inflation.”

The consumer price index figure for June is tentatively scheduled to be officially released on July 17, together with a series of headline indicators including second-quarter gross domestic product.

For a graphic on the CPI data, double-click on: here

Reporting by Beijing Newsroom; Editing by Jason Subler, Keiron Henderson and Jonathan Hopfner

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