China food costs push inflation to 5.5pc in MayBy AP News Jun 14, 2011 3:27PM UTC
SHANGHAI (AP) — China’s inflation rebounded in May to its highest level in nearly three years, buoyed by stubbornly high food prices despite signs that interest rate hikes and other controls have begun to cool the overheated economy.
The National Statistics bureau said Tuesday that consumer prices rose 5.5 percent over a year earlier, driven by an 11.7 percent jump in food costs. That was up from April’s 5.3 percent rate and exceeded March’s 32-month high of 5.4 percent.
The figure was in line with economists’ forecasts, but well above the government’s 4 percent target for the year.
The government reported Monday that bank lending fell in May, indicating that repeated interest rate hikes and increases in required reserves may finally be reining in the excess lending that has helped drive prices higher.
But food prices have remained high, as drought and other weather disasters have decimated crops in wide parts of the country. Rising consumer demand is outstripping food supplies, while a bank lending boom spurred by Beijing’s response to the 2008 global crisis has further inflated demand for key commodities.
Mindful of inflation’s role in eroding the economic gains that underpin their claim to power, China’s communist leaders have declared taming prices a top priority and have sought to steer economic growth from the sizzling 9.7 percent rate in the first quarter to a more sustainable level.
Beijing has hiked interest rates four times since October and ordered companies to hold down prices, but inflation is expected to stay high in coming months.