China’s inflation rate was steady at 2.5 percent year-on-year last month, the government said yesterday, with analysts warning the figure suggested weak growth prospects for the world’s second-largest economy.
The consumer price index (CPI) figure announced by China’s National Bureau of Statistics (NBS) was unchanged from December last year, but higher than the median 2.3 percent expected in a poll of 11 economists by the Wall Street Journal.
The increase in CPI was mainly driven by a 3.7 percent rise in food prices last month, which included both the Western and Lunar New Year holidays, NBS analyst Yu Qiumei (余秋梅) said in a separate statement.
China’s CPI, a main gauge of inflation, rose by 2.6 percent last year, unchanged from 2012 and well below the 3.5 percent target set by the government.
Inflation in the country has slowed markedly since 2011, when annual CPI spiked to 5.4 percent, and maintaining growth in the face of domestic and overseas economic woes has since become a higher priority for Beijing.
The producer price index, which measures costs for goods at the factory gate, declined by 1.6 percent on year last month, worsening from a 1.4 percent decrease in December, the NBS said in another statement.
Analysts said the subdued inflation readings suggested that domestic demand remained weak, which bodes ill for economic growth this year.
“This inflation profile actually heightened the downside risks to China’s economy,” ANZ economists Liu Li-gang (劉利剛) and Zhou Hao (周浩) said in a research note.
The government should lower its growth target to as low as 7 percent this year from 7.5 percent last year to avoid the need for stimulus and allow leeway for the country’s much-needed structural reforms, they said.
Bank of America Merrill Lynch economists Lu Ting (陸挺) and Zhi Xiaojia said the weak data suggested authorities were unlikely to face pressure to tighten monetary policy.
“Subdued inflation would be supportive of a neutral monetary policy,” they said in a research note, adding: “Monetary tightening is not justified.”
Beijing has repeatedly said that it would like slightly slower but better quality growth, and to retool the country’s economic growth model to one driven more by consumption and less by investment.
Although as usual, food prices led CPI increases last month, the pace of their growth slowed from the 4.1 percent rise recorded in December, NBS data showed.
Prices of pork, China’s staple meat, actually declined by 4.3 percent on year last month due to a steady increase in supply and “a curb on waste” at the dining table, Yu said.
The fall in pork prices ahead of the Lunar New Year was the first in 10 years, said Julian Evans-Pritchard, an economist with Capital Economics.
“Looking ahead, the inflation outlook for the coming months remains subdued,” he said in an analysis of the data.