China's consumer price index (CPI), a key inflation index, will rise about 2 percent year-on-year throughout 2006, the Ministry of Commerce predicted in a recent report.

Meanwhile, China's consumer goods market will continue to grow at a brisk rate, the Xinhua-run Shanghai Securities News quoted the report as saying on Monday.

China's total consumer goods retail sales for 2006 are expected to reach 7.5 trillion yuan (US$937 billion), up 13 percent year-on-year, according to the report.

The report said the oversupply situation has been alleviated to some extent. Market supply and demand are basically balanced for 172 out of 600 varieties of major consumer goods (28.7 percent), while the other 428 are still affected by an oversupply problem, according to the ministry's survey.

Price hikes for industrial production materials, including fuel, power, metals and plastic, had a direct impact on the prices of downstream products such as home appliances and other electronic products, the survey said.

Consumer goods made in China are increasingly competitive in the international market, the survey said, giving a special mention to auto manufacture.

According to the Ministry of Commerce's analysis, the measures recently taken by the government to raise the revenues of medium and low-income earners will further stimulate domestic consumption during the second half, especially in rural areas.

China's economy surged a year-on-year 10.9 percent in the first half of 2006, while inflation remained moderate, with the CPI rising only 1.3 percent, the National Bureau of Statistics (NBS) revealed.

(Xinhua News Agency August 8, 2006)