Inflation eases, but still above target
By Wang Yanlin |
May 12, 2011, Thursday
|
Print Edition
Print Edition
CHINA'S inflation rate moderated for the first time this year as tightening policies took effect, but for a fourth month was still higher than government targets.
In April, the Consumer Price Index, the main gauge of inflation, rose 5.3 percent from a year earlier, down 0.1 percent from the level in March, a 32-month high, the National Bureau of Statistics said yesterday.
Food costs, the biggest constituent, accounting for nearly 30 percent in the CPI basket, increased 11.5 percent year-on-year last month, slower than growth of 11.7 percent in March and contributing to an easing CPI.
"The government's tightening efforts are starting to slow inflation," said Matthew Circosta, an economist at the Moody's Analytics. "But it is only happening ever so slightly."
Indeed, the rate in April was higher than the average market forecast of around 5 percent, and exceeded the government yearly target of 4 percent for a fourth month.
Consumer prices in the first four months stood at 5.1 percent, the bureau said, and the non-food sector upped 2.7 percent.
Jing Ulrich, managing director and chairman of global markets for China at J.P. Morgan, said consumer prices may continue to be bolstered by rising non-food prices in the coming months. "The rate may reach its peak in June or July," Ulrich said. "Thus the government should continue to keep policies tight."
To contain rising prices, China has lifted the benchmark interest rates twice this year, with the latest increase on April 5, together with four reserve requirement ratio increases to soak up market liquidity.
The recent price plunge of commodities such as gold and silver may help ease inflationary expectation, but their real effect won't take place until the second half of this year, Ulrich said.
Along with a moderating CPI, China's industrial production also weakened 1.4 percentage points from March to settle at an annualized 13.4 percent in April. Retail sales expanded 17.1 percent last month, down from 17.4 percent growth in March.
But in contrast to slowing growth in industrial output and retail sales, China's fixed asset investment and bank lending kept rising.
Fixed-asset investment in the first four months increased 25.4 percent from a year earlier to 6.27 trillion yuan (US$966 billion), up 0.4 percent from the pace in the first quarter. An annualized rise of 34.3 percent in property investment led the expansion.
"China's April data was very mixed," said Yao Wei, an economist at Societe Generale. "It is now getting even trickier for policymakers to see what is happening in the economy."
"Overall, it is far short of the evidence needed for the central bank to stop tightening just yet," Yao said.
China's economy grew at a stable pace of 9.7 percent in the first three months, with little change from the 9.8 percent growth in the last quarter of 2010.
The World Bank in April raised its forecast for China's 2011 economic growth rate to 9.3 percent from a previous 9 percent and called for more tightening measures to contain risks in inflation and the property market.
In April, the Consumer Price Index, the main gauge of inflation, rose 5.3 percent from a year earlier, down 0.1 percent from the level in March, a 32-month high, the National Bureau of Statistics said yesterday.
Food costs, the biggest constituent, accounting for nearly 30 percent in the CPI basket, increased 11.5 percent year-on-year last month, slower than growth of 11.7 percent in March and contributing to an easing CPI.
"The government's tightening efforts are starting to slow inflation," said Matthew Circosta, an economist at the Moody's Analytics. "But it is only happening ever so slightly."
Indeed, the rate in April was higher than the average market forecast of around 5 percent, and exceeded the government yearly target of 4 percent for a fourth month.
Consumer prices in the first four months stood at 5.1 percent, the bureau said, and the non-food sector upped 2.7 percent.
Jing Ulrich, managing director and chairman of global markets for China at J.P. Morgan, said consumer prices may continue to be bolstered by rising non-food prices in the coming months. "The rate may reach its peak in June or July," Ulrich said. "Thus the government should continue to keep policies tight."
To contain rising prices, China has lifted the benchmark interest rates twice this year, with the latest increase on April 5, together with four reserve requirement ratio increases to soak up market liquidity.
The recent price plunge of commodities such as gold and silver may help ease inflationary expectation, but their real effect won't take place until the second half of this year, Ulrich said.
Along with a moderating CPI, China's industrial production also weakened 1.4 percentage points from March to settle at an annualized 13.4 percent in April. Retail sales expanded 17.1 percent last month, down from 17.4 percent growth in March.
But in contrast to slowing growth in industrial output and retail sales, China's fixed asset investment and bank lending kept rising.
Fixed-asset investment in the first four months increased 25.4 percent from a year earlier to 6.27 trillion yuan (US$966 billion), up 0.4 percent from the pace in the first quarter. An annualized rise of 34.3 percent in property investment led the expansion.
"China's April data was very mixed," said Yao Wei, an economist at Societe Generale. "It is now getting even trickier for policymakers to see what is happening in the economy."
"Overall, it is far short of the evidence needed for the central bank to stop tightening just yet," Yao said.
China's economy grew at a stable pace of 9.7 percent in the first three months, with little change from the 9.8 percent growth in the last quarter of 2010.
The World Bank in April raised its forecast for China's 2011 economic growth rate to 9.3 percent from a previous 9 percent and called for more tightening measures to contain risks in inflation and the property market.
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