Inflation, other measures weaken; stimulus advised
By Wang Yanlin |
May 12, 2012, Saturday
|
Print Edition
Print Edition
CHINA'S inflation weakened as expected in April, making room for more policy stimulus to spur expansion in the world's second-largest economy where more evidence of weakness emerged.
The Consumer Price Index expanded 3.4 percent from a year earlier, down from a rise of 3.6 percent in March, the National Bureau of Statistics said yesterday. Food costs, which account for nearly one third of the CPI, advanced 7 percent, compared to 7.5 percent a month earlier.
Consumer prices returned to an easing track after the surprising rebound in March. The index increased 3.2 percent in February, the slowest in 20 months.
"The latest data showed easing inflationary pressure, and indicated rising demand for policy stimulus," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd.
China's industrial production gained 9.3 percent last month, less than the rise of 11.9 percent in March, the bureau said yesterday. Retail sales growth moderated to 14.1 percent from 15.2 percent, and fixed-asset investment in the first four months advanced 20.2 percent, compared with 20.9 percent in the first quarter.
China's exports and imports also weakened more than feared in April, the General Administration of Customs said yesterday. It reflected a subtle condition in China where both external and internal demand seem to be running out of steam.
"The optimism in China's economy may be not well justified," said Lian Ping, chief economist at Bank of Communications. "China needs to beef up efforts in sustaining the growth momentum, in particular to stimulate domestic demand."
China's economy grew at an 8.1 percent annual rate in the first quarter, the slowest in nearly three years due to corrections in the housing market and sluggish exports. That prompted calls for looser policies.
Inflation used to be a major concern for officials to relax economic policy. But such worries are fading fast. The Producer Price Index, the factory-gate measurement of inflation and a harbinger of consumer prices, lost 0.7 percent in April, following a decrease of 0.3 percent in March.
Zhang Zhiwei, an analyst at Nomura, said the data reinforced his view that policy-makers' priorities should lie in promoting growth. Zhang expected further policy loosening, with two bank reserve requirement ratio cuts this year, the first likely this month.
However, the People's Bank of China seemed calm and nonchalant. It said yesterday that China will maintain a prudent monetary policy in the months ahead, while appropriately fine-tuning the policy when needed.
The economy still has many favorable conditions and positive factors to support steady growth, the central bank said in a report. The government will make its monetary policy more targeted, flexible and forward-looking, it said.
China has cut the reserve requirement ratio, the amount of capital banks must set aside as reserves, twice since November of last year to increase liquidity in the banking system.
The Consumer Price Index expanded 3.4 percent from a year earlier, down from a rise of 3.6 percent in March, the National Bureau of Statistics said yesterday. Food costs, which account for nearly one third of the CPI, advanced 7 percent, compared to 7.5 percent a month earlier.
Consumer prices returned to an easing track after the surprising rebound in March. The index increased 3.2 percent in February, the slowest in 20 months.
"The latest data showed easing inflationary pressure, and indicated rising demand for policy stimulus," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd.
China's industrial production gained 9.3 percent last month, less than the rise of 11.9 percent in March, the bureau said yesterday. Retail sales growth moderated to 14.1 percent from 15.2 percent, and fixed-asset investment in the first four months advanced 20.2 percent, compared with 20.9 percent in the first quarter.
China's exports and imports also weakened more than feared in April, the General Administration of Customs said yesterday. It reflected a subtle condition in China where both external and internal demand seem to be running out of steam.
"The optimism in China's economy may be not well justified," said Lian Ping, chief economist at Bank of Communications. "China needs to beef up efforts in sustaining the growth momentum, in particular to stimulate domestic demand."
China's economy grew at an 8.1 percent annual rate in the first quarter, the slowest in nearly three years due to corrections in the housing market and sluggish exports. That prompted calls for looser policies.
Inflation used to be a major concern for officials to relax economic policy. But such worries are fading fast. The Producer Price Index, the factory-gate measurement of inflation and a harbinger of consumer prices, lost 0.7 percent in April, following a decrease of 0.3 percent in March.
Zhang Zhiwei, an analyst at Nomura, said the data reinforced his view that policy-makers' priorities should lie in promoting growth. Zhang expected further policy loosening, with two bank reserve requirement ratio cuts this year, the first likely this month.
However, the People's Bank of China seemed calm and nonchalant. It said yesterday that China will maintain a prudent monetary policy in the months ahead, while appropriately fine-tuning the policy when needed.
The economy still has many favorable conditions and positive factors to support steady growth, the central bank said in a report. The government will make its monetary policy more targeted, flexible and forward-looking, it said.
China has cut the reserve requirement ratio, the amount of capital banks must set aside as reserves, twice since November of last year to increase liquidity in the banking system.
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