BEIJING (AFP) - China's inflation rate eased sharply in October as government efforts to cool the economy began to really bite, with food prices, one of the main culprits, showing some signs of slowing, official data showed.
The National Bureau of Statistics (NBS) said Friday that the October consumer price index (CPI) was up 4.3 percent compared with a year earlier after an increase of 5.2 percent in September and 5.3 percent in both August and July.
For the 10 months to October, CPI was up 4.1 percent after a rise of 0.9 percent in the same period in 2003.
Urban consumer prices rose 3.7 percent year-on-year in October, while rural CPI was up 5.4 percent, the NBS said.
"It is an obvious slowing (in inflation) as macro-economic control measures are now clearly taking effect," said Li Ruoyu, an economist at the forecast department of State Information Center.
Analysts said the slowdown appeared to reflect a drop in October food prices, which rose 10 percent after a gain of more than 13 percent in September. Significantly, fresh vegetables fell 9.5 percent in October.
"The slowdown in CPI was entirely a result of the slowdown in the increase of food prices," said Qu Hongbin, an economist at HSBC.
The decline, which was within official expectations, was likely to temper speculation over another interest rate hike, Li said.
China raised interest rates for the first time in nearly a decade last month, partly in response to the inflationary pressures that have been building, especially since July.
However, while the CPI data showed an improvement, factory gate price data suggested there could be strong inflation pressures coming through.
China's producer prices rose 8.4 percent on-year in October as inflation in raw materials led to the highest prices of factory gate goods in eight years.
Qu noted that these producer price inflation figures were running ahead fast and complicating the picture.
"The CPI figures help a little to reduce expectations on further inflation, but it doesnt mean that the overall inflation pressure has eased," Qu said.
"Almost all of non-food prices are increasing and investment is still too hot, so the government should continue with its tightening measures," he said.
Since last year, Beijing has battled to rein in unruly economic growth, especially in the construction, steel and cement sectors, as Gross Domestic Product has run at well over 9.0 percent for the past three quarters.
Concerns that more stringent measures may need to be taken has prompted Chinese Premier Wen Jiabao to repeatedly warn of the dangers of overheating and the need for further tightening.
The heady investment climate in the world's fastest growing developed economy has led to further problems in China's financial system, causing money supply to expand too fast and compounding Beijing's difficulties in deflating a banking system bloated with cash and eager to lend it.
However, the latest indicators Friday showed October money supply grew at 13.5 percent, well within the government's target rate of 17 percent, suggesting the central bank's mopping up operations are working.
The bank has managed to maintain M2, the broad measure of money, below the 14 percent mark since August, with September registering a 13.9 percent year-on-year increase, or 0.3 percentage points higher than the 13.6 percent in the previous month.
Also in the government's favour, industrial output growth in October slowed to 15.7 percent year-on-year after a 16.1 percent gain in September.
At the same time, Friday's inflation figures pointed to further difficulties for the urban and rural poor, with price of grain in October up 28.7 percent, while edible oil rose 11 percent and meat 18.9 percent.
Consumer goods prices were up 4.8 percent and services increased 2.6 percent, while gasoline and automotive spare parts rose 13.9 percent.
Utility prices, including water, electricity and fuel rose 12.3 percent in October with residential rentals up 3.1 percent.

11/12/2004 - 10:47 GMT - AFP