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China's inflation rate predicted to fall below 3%

By Wang Yanlin | January 6, 2014, Monday | Online Edition

CHINA’S inflation may fall below 3 percent in December of 2013. But it will be among the very few good harbingers for the new year as most of the other economic indicators may weaken, analysts said.

 

The Consumer Price Index growth will likely land at around 2.5 percent, said Lu Zhengwei, chief economist at Industrial Bank, while economists with Bank of Communications expected a rate of 2.6 percent, both short of the increase of 3 percent in November.

 

“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 drop out of the government’s priorities for the new year; instead, policy makers’ focus will be on maintaining the delicate balance between economic growth and their enhanced reform efforts.

 

The CPI increased to an eight-month high of 3.2 percent in October but then started to scale back.

 

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. Below 50 is considered contraction.

 

Retail sales are likely to be the only positive sector posting faster growth, thanks to people’s additional spending in a promotion-packed month, while industrial production, fixed-asset investment and trade may all report slower expansion, analysts said.

 

The Producer Price Index, the factory-gate gauge of inflation, may narrow from a drop of 1.4 percent in November to 1.1 percent.

 

A government report suggested earlier that China’s economy grew 7.6 percent in 2013, slightly above its official target and just below the 7.7 percent expansion in gross domestic product in 2012 — the worst growth rate for 13 years.

 

Chang Jian, an economist at Barclays, said China still faced fundamental challenges, including industrial overcapacity, mounting local government debt, rising financial risks and the property bubble, which would constrain policy options.

 

China is to release the key economic figures for December and 2013 as a whole starting this week.

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