China CPI increase picks up last month
Print Edition
CHINA’S inflation picked up in June as food prices rose faster but industrial demand weakened, leaving room for further monetary easing measures.
The Consumer Price Index, the main gauge of inflation, grew 1.4 percent from a year earlier last month, stronger than the increase of 1.2 percent in May but weaker than the 1.5 percent in April, the National Bureau of Statistics said yesterday.
Food prices, which account for nearly one third in the CPI basket, rose 1.9 percent last month, faster than the pace of 1.6 percent in May.
Prices in the non-food sector edged up 1.2 percent last month, compared with rise of 1 percent in May with people paying more for cigarettes, alcohol, clothes and health care. But the main contributor to June’s year-on-year CPI growth was faster inflation in the second half of last year rather than new price hikes so far this year, the bureau said.
Yu Qiumei, a researcher at the NBS, said consumer prices were flat from a month ago.
“On a month-on-month scale, food prices was 0.1 percent lower in June and non-food prices were 0.1 percent higher,” Yu said. “Vegetable and pork prices were higher while egg, fruit and lamb prices dipped.”
The Producer Price Index, the factory-gate measurement of inflation and a harbinger of future prices at the consumer end, fell 4.8 percent in May. It weakened deeper than the 4.6 percent through March to May, landing the PPI reading in the negative territory for the 39th consecutive month.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the deflationary risks were still mounting in China and the monetary authority can still lower banks’ reserve requirement to inject liquidity into the banking system.
“The growth of consumer prices was slow and the negative reading of PPI indicated that overcapacity remained a serious problem for the economy,” Zhou said, adding that the central bank has room to cut the reserve requirement ratio, or the amount of money that commercial banks must set aside as reserves, by 0.5 percentage points and benchmark interest rates by 0.25 percentage points in the second half.
China has cut interest rates four times and reserve requirement ratio three times since November to bolster the economy. The gross domestic product growth eased to 7 percent in the first quarter, which was the slowest quarterly expansion in six years.
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