China’s consumer prices rose at their slowest pace in more than a year last month, data showed yesterday, vindicating Beijing’s decision to relax credit restrictions to prevent a painful economic slowdown.
However, industrial output growth also hit its lowest level in more than two years, the National Bureau of Statistics (NBS) said, fueling concerns that turmoil in Europe and the US is hurting China’s key exports sector.
The country’s consumer price index, a key gauge of inflation, rose 4.2 percent year-on-year last month, the NBS said in a statement.
The rate was well below the 5.5 percent recorded in October, but still slightly above the government’s annual target of 4 percent.
It was the slowest pace since September last year, when inflation stood at 3.6 percent, and below analyst expectations for 4.4 percent.
The producer price index, which measures the cost of goods at the farm and factory gate, rose 2.7 percent year-on-year last month, compared with 5 percent in October, the data showed.
It was the slowest pace since December 2009, when it rose 1.7 percent.
Output from China’s millions of factories and workshops rose 12.4 percent year-on-year last month, compared with 13.2 percent in the previous month — the lowest level since August 2009, when output rose by 12.3 percent.
Analysts expect the weaker-than-forecast data will embolden the government to further open credit valves in the coming months to spur economic activity and avoid a sharp slowdown.
“Inflation is marching south at an aggressive pace, with the producer price inflation virtually collapsing,” IHS Global Insight analyst Alistair Thornton said.
However, Thornton warned that the figure was distorted by a spike in inflation in November last year, meaning it was “too early for China to claim complete victory over inflation.”
JPMorgan economist Jing Ulrich said the government would have “greater leeway to carry out selective policy loosening.”
China last week cut the amount of money banks must hold in reserve for the first time in three years to spur lending and counter the turmoil in Europe and the US that threatens to derail the world’s second-largest economy.
The country’s economy is expected to grow 8.9 percent next year, which would be the slowest pace in more than a decade, a state-run think tank said this week.
That compares with an expected growth rate of 9.2 percent this year and follows the blistering 10.4 percent recorded last year, the Chinese Academy of Social Sciences said.
Other data released by the NBS yesterday showed fixed asset investment in Chinese urban areas rose 24.5 percent in the first 11 months of the year compared with the same period last year.
The growth rate was slightly slower than the 24.9 percent that was recorded in the first 10 months of the year.
Retail sales rose 17.3 percent year-on-year last year, slightly up from the 17.2 percent in the previous month.
The figures were released ahead of the annual Central Economic Work Conference, a three-day meeting of top leaders to outline economic strategies for the coming 12 months, which state media said would start on Monday.