China Watch Blog

China Watch Blog has learnt that June consumer prices increased by 2.2 percent from a year earlier, the slowest growth since February 2010. The figure was 0.8 percentage points lower than in May, the National Bureau of Statistics said on July 9.

According to a China Daily report, during the first six months of the year, the country’s CPI increased 3.3 percent compared with the same period last year, lower than the full-year target of 4 percent set by the central government in March.

“Consumer inflation may drop to below 2 percent in July, which can provide larger space for the authorities to periodically and partially readjust macroeconomic policies,” said Ba Shusong, an economist with the Development Research Center of the State Council.

As market demand is shrinking because of the deepening eurozone crisis and the weakening global economy, China’s GDP growth may decrease to 7.5 percent – the slowest pace since the second quarter of 2009, after the 8.1 percent year-on-year increase in the first three months, according to economists.

Last month, food prices, which account for about 30 percent of the CPI calculation basket, climbed 3.8 percent from a year earlier, compared with 6.4 percent in May. Non-food prices increased by 1.4 percent.

Sharply easing inflation pressure was one of the reasons for the central bank to consecutively cut benchmark interest rates twice since June, said Ba.

The People’s Bank of China lowered interest rates last week by 25 basis points to boost growth, the second time in a month. It has also cut commercial banks’ required reserve ratios by 150 basis points since November 2011, setting free about 1.2 trillion yuan ($190 billion) for credit.

Also, the producer price index fell deeper under zero for the fourth straight month to minus 2.1 percent, indicating industrial deflation, which indicated that the demand for companies’ output both overseas and domestically is weakening amid the gloomy global economy.

China Watch Blog has learnt that China’s inflation may weaken in April, allowing more room for policy stimulus, but trade is likely to remain dim.

The Consumer Price Index, a main gauge of inflation, may rise 3.4 percent in April, Lu Zhengwei, chief economist at the Industrial Bank, said.

The Bank of Communications economist Tang Jianwei predicted a 3.3 percent increase, the Shanghai Daily reported.

The inflation rebounded more than expected to 3.6 percent in March from the 20-month low of 3.2 percent in February.

“Inflationary pressure is receding with lower global oil prices and cheaper pork,” Lu said. “This can ease worries of policymakers and allow a reserve requirement ratio cut possibly this month.”

The world’s second-largest economy still needs at least one reserve requirement ratio cut to boost liquidity and sustain growth, which showed some encouraging signs this month, analysts said.

China Watch Blog has learnt that China’s inflation growth rate is expected to ease in April from the previous month with the slowing of food price rises.

Xinhua cited a report released by the Bank of Communications to clients as saying that the consumer price index (CPI), a main gauge of inflation, is likely to increase 3.3 percent year-on-year in April, slightly down from March’s 3.6-percent growth.

The bank attributed the slowdown to slower food price rises and a smaller carryover effect from last year, which was 0.1 percentage points less than that of March.

Food prices, which account for one-third of the basket of goods used to calculate China’s CPI, will decline 0.5 to 1 percent in April from March, it said.

It also projected non-food prices to fall 1.6 percent month-on-month in April.

The National Bureau of Statistics is scheduled to release April’s economic data on May 11, which will include the CPI and figures for industrial production, retail sales and fixed asset investment.

The Chinese government aims to keep CPI growth around 4 percent for the year.

China Watch Blog has learnt that China’s inflation rate in March rebounded more than expected due to higher food costs, with the Consumer Price Index (CPI), the main gauge of inflation, rising 3.6 percent from a year earlier last month.

Food prices increase pushing up inflation

According to the National Bureau of Statistics, CPI was up from February’s 3.2 percent and more than the previous market expectation of 3.5 percent and food costs increased 7.5 percent year on year, compared with 6.2 percent in February.

According to the National Bureau of Statistics, its is trickier for the world’s second-largest economy to add growth-supportive measures.

Li Maoyu, an analyst at Changjiang Securities Co, was quoted as saying in a Shanghai Daily report that, “Such a rate may invite policymakers to be more cautious of any moves to stimulate the economy.”

Li said recent signals of consumer goods experiencing a new round of price increases triggered inflationary expectations again.

Last month, China raised the retail prices for gasoline and diesel by a larger-than-expected margin, and planned to introduce a graduated power tariff system. Afterwards, there were reports of higher prices of milk powder, cooking oil, fast food and shampoo, while producers cited more expensive raw materials and labor costs for their price jumps.

Cheng Siwei, a renowned economist and former vice chairman of China’s top legislature, said last week in Shanghai that the country should remain alert to inflation because speculative money tended to flow into the real goods market and bolster consumer prices when both housing and stock markets were weak.

Some other analysts were optimistic.

Lian Ping, chief economist at Bank of Communications, said inflation was still controllable and the country requires more measures to boost growth.

“Despite a rebound, it was the second month for the inflation rate to fall below the government target of 4 percent,” Lian said. “Considering the economic growth which may ease further, the country should cut the reserve requirement ratio at least once to stimulate the economy.”

China is to unveil the first-quarter gross domestic product growth on Friday, and economists estimated it will moderate to around 8.5 percent, down from 8.9 percent in the final quarter of 2011.

Deflating producer prices were another sign to dismiss inflationary pressure.

The Producer Price Index, a factory-gate measurement of inflation, lost 0.3 percent on an annual basis in March, the lowest since December, 2009.

China Watch Blog reports that Ma Jiantang, China’s top statistics official, on March 5 said he expected inflationary pressure to ease a little as the economy slows this year.

The China Daily quoted Ma as warning of a resurgence in inflation if the problem is not taken seriously. “We should by no means lower our guard [against inflation],” he told Xinhua on the sidelines of the annual parliamentary session, which opened on March 5.

According to a government work report delivered by Premier Wen Jiabao at the annual parliamentary session, the Chinese government set the full-year inflation control target for 2012 at 4 percent, unchanged from the target in 2011.

The Consumer Price Index (CPI), a main gauge of inflation, well exceeded the government’s goal and shot up by 5.4 percent last year.

“Potential factors such as rising labor costs that push up prices are still there,” said Ma, director of the National Bureau of Statistics, which produces a string of economic data such as CPI and gross domestic product for the world’s second-largest economy.

“If not properly controlled, the inflation potential will turn into real risks for our economy,” Ma warned.

China Watch Blog reports that China’s consumer price index (CPI), a main gauge of inflation, is expected to rise 3.6 percent in February, down from January’s 4.5-percent increase.

The China Daily reported UBS AG’s Chinese economist Wang Tao as forecasting that the remarkable pullback was due to continuous declines in food prices, which has a nearly one-third weighting in the calculation of China’s CPI.

It was widely expected that the country’s CPI increase would be lower than 4 percent in February, which was also because of a high comparison base from last year.

The country’s CPI climbed 4.9 percent year-on-year last February because of the Lunar New Year effect. Prices often pick up due to heightened demand for goods and services during the holiday. The holiday effect also drove the CPI growth rebound in January of this year from December’s 4.1-percent rise.

China Watch Blog has learnt that the mainland’s inflation continued to weaken in December, giving more room for policy moves to support a slowing economy.

The Consumer Price Index (CPI), the main gauge of inflation, expanded 4.1 percent from a year earlier last month, the National Bureau of Statistics said.

The pace was slightly down from November’s 4.2 percent, and was the lowest since September 2010.

Food costs, accounting for nearly a third of the basket, increased 9.1 percent annually, rebounding from the growth of 8.8 percent a month earlier due to robust consumer demand in the runup to New Year and the Spring Festival.

Prices in the non-food sector edged up 1.9 percent, easing from November’s 2.2 percent.

“The inflation rate is a bit higher than our previous projection of 4 percent,” said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd.

“It’s mainly due to temporary factors and can’t change the trend of weakening food prices as well as overall moderating inflation in the long run.”

China Watch Blog has learnt that China’s consumer price index (CPI), the main gauge of inflation, rose 5.5 percent year-on-year in October, weakening from September’s 6.1 percent.

Shanghai Pearl Oriental TV Tower

The China Daily quoted the National Bureau of Statistics (NBS) as saying that the October CPI growth marked the slowest surge since May this year, softening from 6.1 percent in September, 6.2 percent in August, 6.5 percent in July and 6.4 percent in June.

On a monthly basis, the cost of living added 0.1 percent in October, said the NBS in a statement at its website, adding that food prices, which account for nearly one third of the basket of goods in the nation’s CPI calculation, moved up 11.9 percent in October from a year earlier but dipped 0.2 percent month-on-month.

China Watch Blog has learnt that China’s inflation rate may accelerate to more than 6 percent year-on-year in June, which could bring the full-year consumer price index (CPI) for 2011 to as high as 5 percent, a government researcher said in remarks reported Sunday.

Zhang Zhuoyuan, an economist at the Chinese Academy of Social Sciences, a top government think tank in Beijing, was quoted as saying in a Global Times report that taming inflation would remain the priority in coming months. He called for faster steps to push real interest rates into positive territory and douse price pressures.

The People’s Bank of China has raised interest rates twice in 2011 and many analysts believe it may raise them again soon in an effort to control inflation.

“It will be very difficult for China to cap its annual inflation within 4 percent and the full-year CPI is likely to reach 5 percent,” Zhang was quoted as saying by State radio.

Beijing has set an annual inflation ceiling at 4 percent this year, but prices keep rising stubbornly and many economists have said it will be tough to achieve the goal.

Zhang said his inflation forecast for June also reflected the relatively low base of comparison of a year earlier.

He attributed the persistent inflationary pressure mainly to an excessive supply of money and credit over a long time, when Beijing rolled out a massive stimulus plan to shield the economy from the financial crisis.

According to a Reuters poll of 22 economists, China’s CPI in May may have accelerated to 5.4 percent from 5.3 percent in April.

The National Bureau of Statistics will publish monthly economic indicators, including the CPI, for May tomorrow.

China Watch Blog has learnt that the consumer price index (CPI), China’s main gauge of inflation, rose by a 24-month high of 3.6 percent in September from one year earlier.

The growth rate was 0.1 percentage point higher compared with that in August, the NBS said. On a month-on-month basis, China’s CPI grew 0.6 percent in September from August, it said.