China's economic growth may ease in the fourth quarter this year on slower investments and exports while inflation will climb on rebounding house and raw material costs, the central bank said yesterday.

The country's economy will likely expand 10.5 percent for the entire year, after increasing 10.9 percent in the first half, the research arm of the People's Bank of China said in a report published in the China Securities Journal.

Consumer prices, an inflation barometer, may grow 1.5 percent for 2006, compared with a 1.2 percent climb in the first eights months of the year, the report said.

"Growth in domestic investments and exports are likely to weaken, which will lead to slower economic growth," the report said. "But the expansion won't slow substantially thanks to mounting consumption."

China's economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade, even after the central bank raised benchmark interest rates and ordered banks to curb credit to overheated industries.

Meanwhile, China's trade surplus widened to US$18.8 billion last month, the fourth straight monthly record, prompting regulators to cut tax rebates on exports of steel and textiles this month.

The World Bank lifted its 2006 forecast last month to 10.4 percent from a 9.5 forecast made in May and increased its 2007 estimate to 9.3 percent from 8.5 percent.

But the red-hot growth seemed to have cooled down in the third quarter. Spending on fixed assets like property, factories and roads rose 21.5 percent in August from a year earlier after jumping 27.4 percent in July, the nation's statistics bureau said.

Although slower expansion in fixed-asset investment helped damp inflation, the central bank cautioned that consumer prices may head upward again as housing prices recover while raw material costs stay high.

The average price of new apartments in the country's 70 biggest cities rose 7.1 percent in August, up 0.5 percentage points from a year before, according to the report.

Oil prices will likely inch higher through the end of the year after encountering a correction in July while coal prices may also be on an upward trend, according to the report.

Editor: Yan