China's May inflation growth accelerates, economic hard landing unlikely

China's inflation rate accelerated in May to a 34-month high, raising speculation that the government will continue its tightening policy stance despite signs of a slowdown in the world's second largest economy.

The consumer price index (CPI), the main gauge of inflation, rose 5.5 percent year-on-year in May, up from 5.3 percent in April and far above the government's annual target of 4 percent, the National Bureau of Statistics (NBS) said on Tuesday.

This was the highest rate since July of 2008, when the index climbed 6.3 percent year-on-year.

"The country is still facing significant inflationary pressure," which will persist for a while, and the government will continue to prioritize easing prices in its macro regulation, NBS spokesman Sheng Laiyun said.

The inflation was largely fueled by food prices, exacerbated by drought and flood in some farming production regions, Sheng said.

Food prices, which account for nearly a third of the basket of goods in the nation's CPI calculation, surged 11.7 percent in May from a year earlier. The pace of increase accelerated from April's 11.5-percent rise. Pork prices rose 40.4 percent in May from a year earlier.

Growth in non-food prices also accelerated, rising by 2.9 percent in May from a year earlier, Sheng said. April's non-food prices increased 2.7 percent year-on-year.

"The steadily rising non-food prices suggest inflation could be sticky and structurally elevated (due to rising labor costs of migrant workers) at about 4 percent in the next several years," Bank of America-Merrill Lynch economist Lu Ting said in an email to clients.

Lu expected CPI growth to be slightly above 6 percent in June, but said the risk of inflation getting out of control was quite small.