Tuesday July 10, 2012
China inflation slows
BEIJING: China's inflation slowed in June to its lowest level in 29 months, official data showed, giving the government more flexibility in its efforts to reboot the world's second biggest economy.
The country's consumer price index (CPI) rose by 2.2% year-on-year in June, the National Bureau of Statistics said, down from 3% in May and the lowest figure since January 2010.
The inflation rate for the first half of 2012 was 3.3%, the bureau said, well below the government's full-year target of 4%.
The inflation figures were the latest in a series of data in recent weeks showing China's economy is slowing, which analysts said would allow the government to act more aggressively in trying to revive slowing growth.
“The softening CPI will give the central bank more room to stabilise the economy,” Tang Jianwei, a Shanghai-based economist with the Bank of Communications, told AFP.
“Before the central bank had to balance between inflationary pressures and softening demand.”
China's economy grew an annual 8.1% in the first quarter of 2012 - its slowest pace in nearly three years. The government will release data for the second quarter on Friday.
The government early this year set an annual economic growth target of 7.5%, down from expansion of 9.2% last year and 10.4% in 2010.
But the central bank last week cut interest rates for the second time in a month, in a surprise move that analysts said indicated the economy was likely slowing more sharply than expected.
Chinese Premier Wen Jiabao then called on Sunday for stronger measures to spur economic growth, saying downward pressure was big.
“We must take further steps to increase the strength of pre-emptive fine-tuning,” the official Xinhua news agency quoted Wen as saying.
Analysts attributed the fall in June inflation to an easing of food prices, a key component of CPI, which rose 3.8% in June, down from 6.4% in May, according to the statistics bureau.
They said inflation would likely fall further in the coming months, with deflation even a possibility.
China's producer price index, an advance indicator of inflation, fell 2.1% in June from the same month a year earlier, the statistics bureau reported Monday.
“Persistent deflation can be poisonous to the economy, which has already been manifested by continuous weakening of business profits,” said Ren Xianfang, chief China economist for IHS Global Insight in Beijing. The deflation threat is a marked turnaround after China's leaders had previously sought to keep inflation in check since the start of 2010. - AFP