Inflation eats into Chinese income growth in Q1

BEIJING (Reuters) - Inflation-adjusted growth in Chinese incomes slowed abruptly in the first quarter, as soaring consumer prices eroded much of the nominal gains.

Urban residents' per capita disposable income reached 4,386 yuan ($627) in the first three months of the year, 11.5 percent greater than a year earlier in nominal terms, the National Bureau of Statistics said on Friday.

Factoring in the effect of price rises, incomes grew just 3.4 percent from a year earlier, the agency said on its website.

That was a significant slowdown from real growth of 12.2 percent in all of 2007 and 16.6 percent annual growth in the first quarter of last year.

Chinese consumer inflation is running at near 12-year highs, driven mainly by soaring food prices, reaching an annual 8.0 percent in the first quarter. The annual rise in consumer prices in the first quarter of 2007 was just 2.7 percent.

The authorities, concerned over the potential social ramifications of rampant inflation, have made controlling it one of their top priorities in the year ahead, while seeking to balance inflation-fighting efforts with the need to drive growth and create jobs.

Rural residents' per capita net income was 1,494 yuan in the first quarter of this year, marking nominal growth of 18.5 percent and real growth of 9.1 percent, the agency said.

That compared with a 9.5 percent real increase during all of last year and a 12.1 percent annual rise in the first quarter of 2007.

City dwellers' average consumer expenditure reached 2,882 yuan in the first quarter, up 10 percent nominally and 2 percent in real terms, the agency said.