China’s consumer inflation rate steady at 1.4% in March – govt

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BEIJING: Chinese inflation held steady at 1.4 percent in March, the government said on Friday, leaving policymakers further room for monetary stimulus as they try to manage a broad slowdown in the world’s second-biggest economy.

The consumer price index (CPI) reading from the National Bureau of Statistics (NBS) was the same as February, when it rose from January’s more than five-year low and slightly better than the median 1.3-percent forecast in a survey of 39 economists by Bloomberg News.

Economists have previously expressed concerns about the risk of deflation in China, especially after January’s slump in consumer inflation to 0.8 percent, the lowest since November 2009.

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


“Consumer price inflation held steady in March but we expect a drop in food price inflation to pull it lower over the coming months,” Julian Evans-Pritchard, China economist at Capital Economics, wrote in a reaction to the data.

“Although inflation is likely to remain in positive territory, a further fall would be consistent with our forecast that the PBoC will carry out additional policy easing this quarter partly in response to deflation fears,” he added, referring to the central People’s Bank of China.

China’s gross domestic product (GDP) expanded 7.4 percent in 2014, the slowest in 24 years.

Despite recognizing the need for slower expansion as they attempt to retool the country’s economic model to make growth more sustainable over the long run, authorities have taken steps to loosen monetary policy in a bid to ensure the slowdown does not get out of hand.

Earlier this year the PBoC cut benchmark interest rates for the second time in three months, citing “historically low inflation” and has also lowered the reserve requirement ratio (RRR), the amount of money banks must keep on hand, to free up funds for lending.

Nomura economists said they expect three more rate cuts and another three more RRR reductions this year.

“Overall, subdued inflationary pressures leave more room for policy easing,” they said in a note.

The NBS also said 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 for the 37th straight month in March.

The PPI fell 4.6 percent year-on-year, better than the 4.8 percent decline recorded in February, which was the worst result since October 2009.

The March figure was also better than the median forecast of a 4.8 percent decline in a Bloomberg poll of 35 economists.

NBS analyst Yu Qiumei said in a statement that the PPI decrease had shrunk for the first time since July.

Rising prices for oil, gas, chemicals and chemical products were a key factor, Yu said.

AFP

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