Helped by slower increases in food prices, China’s inflation moderated last month, possibly giving the government scope to hold off on further tightening of monetary policies as it confronts a slowing global economy.
Consumer prices in the world’s second-largest economy rose 6.2 percent over a year earlier, cooling from a 37-month high of 6.5 percent in July, the National Statistics Bureau said yesterday.
Inflation is still above the -government’s 4 percent target for the year, but the latest figures suggest that repeated interest rate hikes and other curbs meant to chill the overheated economy are taking hold. That could allow China’s leaders greater leeway for policies aimed at keeping economic growth on track, as the US and European outlook worsens.
Less pressure from inflation “would remove a significant barrier to further policy stimulus in the event of a slump in global demand,” Mark Williams of Capital Economics said in a report.
Food prices, which comprise a large share of the consumer price index, climbed 13.4 percent, down from 14.8 percent in July. A 29.3 percent surge in prices for meat and poultry and 12.2 percent increase for staple grains kept food price increases relatively strong.
“China’s inflation is down, but not out,” IHS Global Insight economist Alistair Thornton said.
“The moderation in inflation is not broad based,” he said, attributing it mainly to slower increases in pork prices, which still jumped 45.5 percent from a year earlier.
Thornton said that non-food inflation actually increased to 3 percent. Among the highest increases was a 14.9 percent climb in costs for diesel and gas.
Surging prices complicate Beijing’s efforts to promote retail spending and other domestic consumption and reduce reliance on exports and investment. Spending on new factories and other investments has accounted for more than 40 percent of China’s output over the past decade — several times that of the US, Japan and other major economies.
The fragility of major export markets could prod China into easing credit to keep demand at home steady, Williams said.
“Nonetheless, we would not be surprised if controls on credit growth were quietly eased much sooner, particularly if the global outlook worsens,” he said in a report issued before figures were released yesterday.
Other data released yesterday showed output from China’s factories and workshops rose 13.5 percent year-on-year last month — slower than in July. Retail sales, the main gauge of consumer spending, jumped 17 percent last month, while fixed asset investment, a measure of government spending on infrastructure, rose 25 percent in the first eight months of the year.
As the US and Europe stare at fears of another recession after the 2008 financial crisis, analysts said policymakers in export-reliant China were going to have to maneuver very carefully.
“They are faced with a weakening external environment and a policy-driven domestic slowdown that heightens calls for a loosening, even as elevated inflationary pressure reduces the space available for that loosening,” Thornton said. “The next six months are going to require some extremely skilled economic driving.”
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