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CPI report shows annual inflation rate slowing to 1.8 percent in April

By Wang Yanlin | May 9, 2014, Friday | Online Edition

China's inflation growth eased in April as food prices declined due to seasonal factors, the National Bureau of Statistics said this morning.

The Consumer Price Index, the main gauge of inflation, expanded 1.8 percent from a year earlier last month, down from March's rate of 2.4 percent and the lowest monthly report since October 2012.

The Producer Price Index, the factory-gate measurement of inflation, dropped 2 percent in April, narrowing from the contraction of 2.3 percent a month earlier.

Yu Qiumei, an analyst with the statistics bureau, said April's inflation slowdown was led by cheaper pork and vegetables because of seasonal factors. Last year, volatile temperature changes in April led to fast-moving prices of pork and vegetables, creating a high comparative base.

Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the risk of deflation is looming large on the horizon.

"It is time for the central bank to contemplate easing monetary policies, such as short-term open market operations, to maintain accommodative market conditions," Zhou said.

He also suggested the reserve requirement ratio for large and mid-sized banks should be cut, after small lenders were allowed to put aside less funds with the central bank last month.

The PPI inflation has been negative for more than two years. As an important leading indicator for CPI, that raises the risk of deflation in the CPI, Zhou said.

In the first four months, China's CPI expanded 2.2 percent year on year, much lower than the 3.5 percent limit set by the government for this year.

 

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