CHINA'S inflation rebounded to a four-month high in June, a result that was attributed largely to relatively weak inflation for the same month in 2012, the National Bureau of Statistics said this morning.
The Consumer Price Index, the main gauge of inflation, rose 2.7 percent from a year earlier last month, up from the increase of 2.1 percent in May.
The lower comparative base - last June's weaker inflation - was called the main reason for the higher-than-expected figure this June, and it was unlikely to become a hurdle for possible easing polices, analysts said.
Yu Qiumei, a senior auditor at the bureau, said the price increases were modest in general, and the sharp expansion of last month's CPI was largely due to a low base.
Inflation expanded 2.2 percent in June 2012, a steep dip from the gain of 3 percent in May 2012, according to the bureau's data.
On a sequential basis, or month-on-month basis, the CPI growth in June actually remained unchanged from May, Yu said.
"The inflationary environment in China remains largely non-existent," said Moody's Analytics in a research note today. "Although consumer prices rose year on year, this reflects base effects more than anything: prices were largely unchanged from May, and inflation outside food is low."
Food costs did grow at a faster pace, rising 4.9 percent year on year last month, compared with the gain of 3.2 percent in May. Prices of fresh vegetables added 9.7 percent and fruit prices jumped 11.4 percent, the bureau said, while cost of meat expanded 4.8 percent.
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said despite the unexpected CPI leap in June, his research team maintained the forecast that average inflation in China will be around 2.5 percent for the whole year of 2013, much lower than the government target of 3.5 percent.
"We reiterate the view that the monetary authority should anchor its monetary policy based on forward-looking inflation, growth and employment dynamics, and conduct a more accommodative monetary policy, such as lowering the interest rate and even the reserve requirement ratio," Zhou said. "That said, the banking regulator, rather than the central bank, should take more responsibility in disciplining the commercial banks' activities."
China's commercial banks almost fell into a credit crisis in late June with frequent reports of liquidity crunches. It triggered calls for more accommodative policies before the central bank finally injected cash to quell fears and avoid a potential financial chaos.
Another evidence for tamed inflation was the Producer Price Index, the factory-gate measurement of inflation that reflects future growth trends of CPI, still fell 2.7 percent on an annual basis in June, the same as a month earlier.
"We predict the same picture of little inflationary pressure as in the previous months," said Yao Wei, China Economist at Societe Generale. "The headline inflation rates will remain muted, thus not posing a hurdle to policy easing."
But Yao added that Chinese government may not resort to any quick fix, which it has been resisting since last year, and the trend of soft growth and muted inflation is likely to last in the near term.