China May Inflation Rises

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

Rising inflation has prompted concern Beijing might hike interest rates or take other steps to cool growth that hit 11.9 percent in the first quarter. That could affect the United States, Europe and others that look to China to help drive demand for their iron ore, factory machinery and other exports.

Analysts expect China’s rapid expansion to slow as the initial impact of its 4 trillion yuan ($586 billion) stimulus wanes. The World Bank’s forecast for full-year growth is 9.5 percent.

Slower growth could complicate efforts to control prices because the standard tool of rate hikes might further chill economic activity.

May inflation was driven by a 6.1 percent rise in food costs. 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.

May growth in investment in factories and other fixed assets – seen as an indicator of future growth – slipped from April’s 26.1 percent expansion to 25.9 percent, the statistics bureau reported. Growth in industrial output declined for a third month, falling to 16.5 percent from the previous month’s 18.8 percent expansion.

Total lending by Chinese banks in May shrank by 17 percent from April’s level to 639.4 billion yuan, ($93.6 billion), the central bank reported.

Growth in retail sales accelerated slightly in May to 18.7 percent from April’s 18.5 percent rate.


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