China’s CPI easing only good news
Print Edition
China’s inflation may not rise above, or even touch, 3 percent in December, and this may be just about the best news for policymakers in the new year as most of the other economic indicators are seen to weaken, analysts said.
The rise in the consumer price index, a broad measure of inflation, will likely hit around 2.5 percent, said Lu Zhengwei, chief economist at the Industrial Bank. Economists with the Bank of Communications expect CPI to be at 2.6 percent, both short of the 3-percent increase in November.
“The inflation, despite the year-end effect, will retreat from the latest round of rebound,” Lu said. “It indicates the loss of some growth momentum in the economy.”
Tang Jianwei, an economist with the Bank of Communications, said inflation will not be on the government’s priority list for the year. Instead, policymakers will focus on keeping a delicate balance between economic growth and deeper reform efforts.
The CPI rose to an eight-month high of 3.2 percent in October but then started to weaken.
Chang Jian, an economist at Barclays, said China still faces fundamental challenges, including industrial overcapacity, mounting local government debt, rising financial risks and the property bubble.
China’s economy has shown signs of moderation in the past few months. The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in industrial companies, eased to 51 in December, a four-month low, and not far off from contraction of below 50.
Retail sales may be the only sector posting faster growth last month as consumers spent more due to the avalanche of promotions while industrial production, fixed-asset investment and trade may all post slower growth, analysts said.
A government report suggested earlier that China’s economy grew 7.6 percent in 2013, slightly above its official target.
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