GROWTH of China's consumer prices in May slowed to 7.7 percent from April's 8.5 percent, thanks to falling food costs, the National Bureau of Statistics said yesterday.

The slower pace fell within the expectations of some economists, who also considered it a turning point when inflationary pressures begin to ease.

The Consumer Price Index, the main gauge of inflation, rose 7.7 percent last month, with a growth of 7.3 percent in cities and 8.5 percent in rural areas.

Food prices, which make up about a third of the CPI basket, jumped 19.9 percent, easing from the 22.1-percent increase in April.

The costs of vegetables dropped 15.7 percent from a month ago but were still 10.3 percent higher compared with a year earlier.

Pork prices soared 48 percent year on year, but the supply has become more stable after farmers received government subsidies for raising piglets, the bureau said.

The non-food sector posted a gain of 1.7 percent, similar to the 1.8 percent advance a month earlier.

"The May CPI data bring relief to the authorities," said Stephen Green, an economist with Standard Chartered Bank (China) Ltd. "Agriculture now seems to be responding. Vegetables, for example, have retreated from the peak of a 46-percent year-on-year rocket in February."

Wang Qing, an economist with Morgan Stanley Research, said the slower CPI growth defied concerns that the increase in the reserve requirement ratio announced last Saturday was a preemptive move on inflation.

"The latest data for May put us back on track for our call for easing inflation in the remainder of the year," said Wang.

The central bank on Saturday ordered lenders to set aside more money as reserves to curb liquidity and inflation. The reserve ratio will rise 0.5 percentage point on Sunday, and another half percentage point on June 25 to a record 17.5 percent.

However, there were other price pressures, according to some analysts.

The Producer Price Index, the factory-gate inflation gauge, surged 8.2 percent in May to reach its highest in more than three years. It did not fully reflect the price increases in crude oil and other basic commodities on the international market as the government put a cap on retail price rises in oil on the domestic market.

"We continue to expect Chinese producers to raise selling prices to help cover the rising input costs amid continued hikes in raw-material prices," said Wang. "In other words, we do expect a further pick-up in non-food inflation."

In May, China's trade surplus dropped 9.9 percent from a year earlier to US$20.2 billion after both export and import growth accelerated.

CPI figures and the trade surplus show a slowdown trend serving to cool the economy. Some analysts believe there should be less harsh macroeconomic measures.

The National Bureau of Statistics is set to unveil the May retail sales today.(Shanghai Daily)