Inflation to Peak in August: Morgan Stanley Economist

China's comsuer price index will peak in August, driven by soaring food prices.

China’s consumer price index, the main gauge of inflation, will peak in August, according to Wang Qing, a senior economic at Morgan Stanley.

He made the remarks on Friday, when releasing macroeconomic data for this month, adding that the CPI for August was projected at 3.4 percent compared with 3.3 percent for July.

Food prices hikes and the stable non-food prices will continue to boost CPI in August, he said.

Wheat prices in China began to pick up momentum, pushed by a dramatic rise in international wheat prices. However, it will not exert significant pressure on China’s inflation, according to Mr. Wang, thanks to a sufficient stock and relatively independent domestic market.

Exports will grow 35 percent in August from a year ago, Mr. Wang said. Meanwhile, imports are expected to rebound to 25 percent, 1.8 percentage points higher than July, which will lead to $30 billion trade surplus in August.

The central bank’s further move to call back liquidity in open market signals a cautious attitude towards the uncertainties of inflation, Mr. Wang explained. New lending in August will below that in July at 500 billion yuan, and the growth of M2 will be held stable at 17.5 percent compared with 17.6 percent in July, he said.