China Watch Blog has learnt that China’s consumer prices rose at the slowest pace in two years in May, brushing off concerns of inflation and suggesting the reason behind recent government’s decision of easing policies.
Consumer Price Index, the main gauge of inflation, expanded 3 percent from a year earlier last month, the National Bureau of Statistics said this morning.
It compared with the pace of 3.4 percent in April and previous market estimation of 3.2 percent.
Food costs, which make up nearly one third in the basket, increased 6.4 percent in May, less than 7 percent a month earlier.
Producer Price Index, the factory-gate yardstick of inflation and a harbinger of future consumer prices, dropped 1.4 percent last month, extending the loss stream for a third month and deepening from April’s 0.7 percent fall.
“The weaker-than-expected data confirms that inflation is no longer the top priority,” said Li Maoyu, an analyst at Changjiang Securities Co. “The slower growth pace of consumer prices is a reflection of weakening domestic demand, and may invite policy-makers to launch more supporting measures.”
China’s gross domestic product expanded 8.1 percent year on year in the first quarter, the slowest in nearly three years and stoking fears of a hard landing in the world’s second-largest economy.
To support growth, China has rolled out a set of stimulus measures including subsidies for consumption of energy-efficient products, expansion of private investment in previously state-dominant sectors and faster approval of new investment projects.
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