China’s consumer prices fell for the fourth month in a row last month, data showed yesterday as the economy continued to be hit by the global slump despite a massive stimulus plan aimed at boosting spending.
The consumer price index — the main indicator of inflation and deflation — fell 1.4 percent last month year on year, according to the National Bureau of Statistics, which added that the figure was down 0.3 percent from April.
The data comes as Beijing tries to increase domestic consumption while its export-dependent economy is battered by the crisis, which has slashed demand in key overseas markets such as the US and the EU.
But analysts said that despite the falling prices, China’s economy was showing other signs of recovery and deflationary pressures could ease in the coming months.
“The consumer price index is a little below our expectations,” said Gao Yi, a Shanghai-based analyst with Oriental Securities.
“But concerns over deflationary pressures have significantly eased recently because nonferrous metal and crude prices rallied strongly in international markets over the past months,” Gao said.
Deflationary pressures would bottom out in July after the commodity price hikes trickled into China’s economy, he said.
A prolonged period of falling prices is a danger to the economy because it encourages people to defer purchases in the hope of getting them cheaper later on.
The government announced a package worth US$590 billion in November to kickstart the world’s third-biggest economy, which is suffering its worst slowdown in nearly two decades.
China’s export-dependent economy grew 6.1 percent in the first quarter of the year, the lowest level in at least 10 years.
Before the global economic crisis struck, China had experienced double-digit growth from 2003 to 2007. And even in the first months of last year, policy-makers’ main concern was keeping inflation in check.
However, Sun Mingchun (孫明春), a Hong Kong-based economist with Nomura International, said: “I think deflation is coming to an end. We expect it to return to positive territory in September.”
Goldman Sachs economist Yu Song also said a rebound in economic activity in recent months indicated that deflationary pressures were on the wane.
“As we expect the rebound to continue in the coming quarters, we believe deflationary pressures will disappear in the latter half of the year,” Yu said in a research note.
The inflation figure for last month is only slightly better than the 1.5 percent decline recorded in April, which followed a 1.2 percent fall in March and a 1.6 percent drop in February.
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