June Inflation Dropped to 7.1%    

China's consumer inflation rose to 7.1% in June year-on-year, down from 7.7% in May and 8.5% in April as foods prices fell this June. "But the deceleration will not ease the pressure of inflation in the second half of 2008," analysts said.
    "The relatively high CPI growth last June provides a favorable base for the drop," said an economist. China's CPI growth started to go up last June and reached 4.4% year-on-year, compared with 2.2% in January and 2.7% in February 2007.
   "It's too early to be optimistic."
   China raised prices of oil products and electricity in June to maintain normal operations of refineries. Some economists said it would lead to less than half a percentage point rise in the 2008 CPI.
   The Bank of China (BOC) predicted in an earlier report CPI in 2008 would increase 6.8% year-on-year. However, the report said "Rising prices of gasoline, coal oil and electricity will push up the previously estimated figure."
    CPI in the first half of 2008 rose to 7.9% year-on-year, driven largely by foods prices hikes.
   Economists forecast that China could raise the interest rates this October as inflation picks up.
   On the other hand, growth of the producer price index (PPI), a leading indicator for CPI that measures ex-factory prices, reached 7.6% year-on-year, down from 8.2% in May.
   An analyst expressed that raising export tax rebates for some commodities would practice to drive the decline economy.