Food prices push China inflation up 2 pct in Aug.

AP News
Posted: Sep 08, 2012 11:20 PM

BEIJING (AP) — A jump in food prices pushed China's inflation rate to rise 2 percent in August compared with a year earlier, complicating efforts by the government to revive growth with further stimulus measures.

The consumer price index for August reported Sunday was higher than July's 1.8 percent growth. August food prices rose 3.4 percent from a year earlier, an increase from the previous month's 2.4 percent growth.

Producer prices fell 3.5 percent year-on-year, compared with a 2.9 percent decline in July, China's National Bureau of Statistics said.

The government has cut interest rates twice since the start of June to reverse a painful slowdown of 7.6 percent in the second quarter, but authorities are moving cautiously after its huge stimulus during the 2008 global crisis ignited inflation and a wasteful building boom.

The rise in consumer prices in August — both year-on-year and month-on-month — seems to place the government in a quandary, IHS Global Insight analyst Alistair Thornton said in a report.

"They need further stimulus to revive growth, but have less room to absorb the inflationary pressure of that stimulus," he wrote.

This week, the government announced it had approved 25 subway building projects worth tens of billions of dollars as part of its cautious approach to stimulating the economy.