Chinese annual inflation fell in May to 7.7 per cent, the first major break in a year-long surge, as food price increases slowed and other products resisted rising global commodity costs, the government said today.
The drop, which contrasts with a rising trend across much of the globe, will provide some relief to policy makers who have declared high inflation their main economic challenge.
The consumer price index (CPI) showed food inflation had eased to 19.9 per cent in the year to May from April's 22.1 per cent pace, the national Bureau of Statistics said.
Non-food inflation nudged down to 1.7 per cent from 1.8 per cent even though figures on Wednesday showed factory gate prices rose at the fastest rate since late 2004.
"Lower food inflation is helpful to stabilising inflation expectations. We expect lower CPI figures for the rest of this year. It could get as low as 6 per cent," said Ben Simpfendorfer, a strategist at Royal Bank of Scotland in Hong Kong.
Beijing is not alone in its struggle with inflation. From Europe to the Middle East and much of Asia, governments are battling to tame the fastest price increases in years.
China provides most of its own food, which makes up a third of the consumer price basket, so as it recovers from a series of domestic farming setbacks it has largely been able to insulate Chinese families from fast-climbing global food prices.
But rapid industrialisation means China is less able to escape the impact of rising raw material prices, and some economists fear the pipeline pressure evident in the producer price index could feed into consumer prices over the year.
"The concern is that record factory-gate prices will pass through to consumer prices. So I think the decline in CPI in coming months will be slow and gradual," said Shi Lei, chief economist at Tianxiang Investment Consulting in Beijing.