China March con­sumer in­fla­tion steady at 1.4%: gov’t

The China Post - - FRONT PAGE -

Chi­nese in­fla­tion held steady at 1.4 per­cent in March, the gov­ern­ment said 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 fiveyear 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, espe- cially 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 yearon-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.

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