China’s consumer inflation was more muted than expected last month and producer prices fell for the 37th consecutive month, adding to concerns about growing deflationary pressures which are likely to trigger further policy easing.
Annual consumer inflation picked up a shade to 1.5 percent last month, the National Bureau of Statistics said yesterday, edging up from 1.4 percent in March, but below the 1.6 percent predicted by analysts.
A seasonal jump in food prices aside, some economists said that the figures pointed to moderate price pressures and lackluster domestic demand in the world’s second-biggest economy.
Worried about China’s economy, whose growth cooled to a six-year low of 7 percent in the first three months of this year, the central bank has cut interest rates and relaxed banks’ reserve requirements four times in six months.
Indeed, the central bank acknowledged the growth challenges on Friday, when it said the economy faced headwinds and that the inflation outlook was benign, but ruled out the need for quantitative easing.
Wary about following in the footsteps of Japan, where a decade-long fall in consumer prices has hurt the economy, Chinese officials have warned about the danger of deflation, saying a cool down in inflation to under 1 percent would raise red flags.
Yesterday’s data showed that producer prices remained stubbornly weak, with the producer price index sliding 4.6 percent.
The market had expected producer prices to fall by 4.4 percent on an annual basis after a decline of 4.6 percent in March.
Lower extraction costs for miners and cheaper raw material prices led the drop in producer prices, data showed. Extraction costs last month tumbled 19.6 percent from a year ago and raw material prices slid 8.3 percent.
Weighed down by a property downturn and slackening growth in manufacturing and investment, China’s economic growth is expected to slow to a quarter-century low of about 7 percent this year, from 7.4 percent last year.
Data suggests that the recent flurry of policy easing has yet to stoke a rebound in activity.
Consumer inflation is still far short of Beijing’s 3 percent target for this year, and trade data released on Friday also pointed to entrenched weakness.
Worried about the risk of job losses, China’s leaders are likely to resort to fiscal stimulus to revive growth, government economists said this week.
Data on industrial output, retail sales, investment and bank lending is set to be released next week. Economists had hoped those readings would show some signs the economy was stabilizing.
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