China June consumer inflation rises to 1.4%

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BEIJING: The consumer inflation rate in China rose to 1.4 percent in June, authorities said on Thursday, though economists cautioned further stimulus was needed in the
world’s second-largest economy as upward price pressures remained subdued.

The reading for the consumer price index (CPI), a main gauge of inflation, released by the National Bureau of Statistics (NBS) was higher than May’s 1.2 percent and slightly above the median estimate of 1.3 percent in a Bloomberg News survey of economists.

Moderate inflation can be a boon to consumption as it pushes consumers to spend before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can hurt growth.

Inflation has been weak in China as economic growth slows and commodity prices have fallen, with some economists raising the threat of deflation—a debilitating and sustained fall in prices.


The economy expanded 7.4 percent last year, its slowest pace in 24 years.

The Asian giant has battled persistent weakness this year in mainstay indicators such as industrial production and trade, with gross domestic product (GDP) growth slowing to 7.0 percent in the first three months of 2015, the worst quarterly result in six years.

China announces GDP figures for the April-June quarter on Wednesday.

Authorities have taken a series of measures to bolster the economy, cutting interest rates four times since November and also reducing the amount of funds banks must keep on their books, a step to boost lending and stimulate growth.

The measures have also been aimed at putting a floor under weak consumer prices.

Casting a further shadow over the economy has been a precipitous decline in the country’s benchmark share market in Shanghai, where by the end of trading Wednesday prices were down 32 percent from their peak on June 12.

Weak demand
Economists say authorities need to do more.

“China’s monetary and fiscal policies will have to become more supportive in the remainder of year,” ANZ economist Liu Li-Gang wrote in a reaction to the June price data.

He citing “elevated” deflation worries and fallout from the ongoing rout in shares, adding that a further cut in the reserve requirement ratio (RRR) for banks “could be imminent.”

The producer price index (PPI)—a measure of costs for goods at the factory gate and a leading indicator of the trend for CPI—declined 4.8 percent in June, the NBS said, worsening from 4.6 percent in May and the 40th consecutive fall.

On the consumer side, food prices, normally the key driver for Chinese inflation, rose 1.9 percent year-on-year, the NBS said, accounting for 0.62 percentage points of the total increase.

The survey collects prices from more than 63,000 outlets including grocery stores, supermarkets, shopping malls and agricultural trade markets across 500 cities and counties in the country, the NBS says.

AFP

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