Tue, Oct 16, 2012 - Page 15 News List

Chinese inflation slows to 1.9 percent

CALM AS CADRES:Although the Chinese economy has slowed in recent months, Chinese officials have moved cautiously for fear that a stimulus may ignite inflation


A vendor sleeps on packs of grapefruit at a market in Wuhan, Hubei Province, China, yesterday. China’s annual consumer price inflation ticked down to 1.9 percent last month from August’s 2 percent, official data showed yesterday.

Photo: Reuters

China’s inflation eased further last month, giving the government more room to stimulate the country’s slowing economy.

Consumer inflation fell to 1.9 percent from August’s 2 percent rate, data showed yesterday. Politically sensitive food prices rose 2.5 percent, down from the previous month’s 3.4 percent.

The decline gives Beijing more room to cut interest rates or boost spending to reverse the country’s deepest slowdown since the 2008 global crisis.

“There’s no argument about it, the economy is yet to stabilize,” IHS Global Insight economist Alistair Thornton said in a report. “Fears surrounding the inflationary impact of monetary loosening on consumer prices are misplaced — the onus remains on growth stabilization.”

Producer prices contracted 3.6 percent compared with a year earlier, a striking sign of slack demand despite two interest rate cuts since the start of June and higher government spending on building airports and other public works.

Chinese leaders have been moving cautiously in response to the slowdown after their huge stimulus in 2008 ignited inflation and a wasteful building boom. Economic growth fell to a three-year low of 7.6 percent in the quarter ending in June and officials including Chinese President Hu Jintao (胡錦濤) have warned it may decline further before recovering.

Analysts expect growth to decline further to about 7.3 percent when the latest quarter’s figures are reported this week.

Last week, the World Bank cut its annual growth forecast for China to 7.7 percent from its May outlook of 8.2 percent.

Trade data released on Saturday showed Chinese imports revived slightly from the previous month’s contraction, but grew by only 2.4 percent, suggesting a recovery has yet to take hold.

“There is little convincing evidence that spending growth is doing anything better than standing still,” Mark Williams and Qinwei Wang of Capital Economics said in a report.


Separately, India’s inflation accelerated to 7.8 percent last month after the government hiked subsidized fuel prices to rein in the budget deficit.

The number released yesterday is worse than expected and gives the central bank little room to cut its key interest rate to counter slowing economic growth when it meets later this month.

Economists polled by CNBC-TV18 forecast inflation of 7.7 percent for last month.

C. Rangarajan, the chairman of the Prime Minister’s Economic Advisory Council, told reporters the rise was “largely attributable” to the increase in the fuel price.

“This increase in fuel prices was planned,” he said. “Going ahead, I would believe the tendency would be for inflation to fall.”

“It’s still in the grey zone, because the Reserve Bank probably would be looking for some sign of a decline in inflation in order to be able to move ahead,” he said.

Inflation was 7.6 percent in August. Last month’s inflation is the highest for India since November last year, according to financial information provider FactSet.

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