China's inflation less of a concern as it slows to 7-month low
Print Edition
China’s inflation growth moderated to a seven-month low in December, taking it well below the government control target for 2013 and leaving more room for policy options this year.
The Consumer Price Index, the main gauge of inflation, expanded 2.5 percent from a year earlier last month, the National Bureau of Statistics said yesterday.
The pace slowed sharply from November’s 3 percent increase and was the lowest since May.
The Producer Price Index, the factory-gate gauge of inflation, fell 1.4 percent last month, the same as in November.
Yu Qiumei, a bureau analyst, said a high comparative base last year was part of the reason for the steep moderation. The extreme cold in December 2012 pushed up prices last winter.
Still, China’s inflation was weaker than expected, and Chang Jian, a Barclays economist, said it was a reflection of the decline in food inflation, which moderated to 4.1 percent in December from November’s 5.9 percent.
Zhang Zhiwei, a Nomura economist, said inflation is not a major concern at this stage.
“But there is no strong incentive for decision makers to loosen policy at the moment to stimulate growth, with the country’s leadership comfortable with the current speed of growth,” Zhang said, noting that low inflation provides more room for policy support when growth slows more sharply.
China’s gross domestic product expanded 7.7 percent in the first three quarters of 2013, with signs of stabilization as the pace picked up to 7.8 percent in the third from 7.5 percent in the second.
But some economists say growth may have slowed to around 7.5 percent again in the fourth quarter because of weakening industrial production and fixed-asset investment over the past two 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 from the line that separates expansion from contraction.
China’s consumer prices gained 2.6 percent in 2013 as a whole, lower than the government’s 3.5 percent control target.
Zhou Hao, an economist at Australia & New Zealand Bank Group Ltd, said while CPI inflation was lower than expected, the January figure will likely exceed 3 percent again due to the Chinese New Year that falls on January 31.
“Onshore liquidity conditions will likely remain tight in general despite mild inflation pressures,” Zhou said. “The demand for cash during the Chinese New Year will only exacerbate this.”
China will release the December and full-year key economic data on January 20.
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