China Inflation Rises Again to 6.4 Percent in June

China’s consumer price index (CPI) rose 6.4 percent year-on-year in June, the highest level since June 2008, said the National Bureau of Statistics (NBS) Saturday. The CPI is seen as the best indicator of inflation.

The rise was over twice the 2.9 percent CPI rise in June of 2010 and higher than the 5.5 percent seen in May.

The most worrisome component of the rise were food prices which jumped 14.4 percent over last June and is significantly higher than May’s 11.7 percent. Food accounts for nearly a third of the basket of goods in China’s CPI calculation, and is the component to which the majority of the population is most sensitive.

Even more worrisome in the long term is the whopping 7.1 percent year-on-year jump in China’s Producer Price Index (PPI), the guage of wholesale inflation, said the National Bureau of Statistics (NBS) Saturday.

The PPI growth accelerated from May’s 6.8 percent rise though it was flat from May. The producer purchase prices jumped 10.5 percent year-on-year, a level that is likely to be passed on to consumers, suggesting an even higher CPI rise for July.

The producer prices of production materials rose 7.9 percent in June over last year while consumption goods rose 4.6 percent.

The CPI rose 7.0 percent in rural areas versus only 6.2 percent year-on-year in urban areas as much of China’s economic growth has begun shifting inland from overbuilt coastal areas.

Analysts believe the CPI is likely to begin coming down once government efforts to cool prices kick in. However, the PPI suggests that may not happen for at least two or three more months.