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Inflation reaches 2% as industrial output slows
By Wang Yanlin |
September 10, 2012, Monday
|
Print Edition
Print Edition
China's economic data for August shows inflation rebounding while growth in factory production slows to a three-year low and investment continues to falter, dimming hopes for a robust recovery in the world's second-largest economy this year.
The Consumer Price Index, a key gauge of inflation, expanded 2 percent from a year earlier last month, up from July's increase of 1.8 percent and ending a streak of four straight months' decline, the National Bureau of Statistics said yesterday.
Food costs, nearly a third of the basket, spurred the rebound by rising 3.4 percent last month, accelerating from 2.4 percent in July. A surge in corn and grain prices around the world and bad weather affecting the vegetable crop were cited as partly to blame.
In comparison, costs in the non-food sector increased 1.4 percent last month, lower than July's 1.5-percent gain.
Zuo Xiaolei, an economist at China Galaxy Securities, said the rise in inflation was expected.
"This CPI rebound does not mean China's economy has bottomed out," Zuo said. "It is mainly a reflection of seasonal factors, as well as changing supply and demand after recent natural disasters. They make it more difficult for China to launch further easing policies."
Wang Jun, a researcher with the China Center for International Economic Exchanges, urged the government to further loosen the monetary supply despite the rebounding inflation, as he expected the CPI to retreat again in the fourth quarter.
Other indicators showed extended weaknesses in China's economy, instead of the mild recovery analysts had expected.
The Producer Price Index, the factory-gate measurement of inflation, fell 3.5 percent year on year in August, a 34-month low from July's drop of 2.9 percent.
Industrial production grew 8.9 percent annually last month, a three-year low down further from July's 9.2 percent.
Fixed-asset investment in the first eight months rose 20.2 percent, also 0.2 points slower than that during the January-July period and defying market estimates of a strong rebound after faster approvals of investment projects since June. Retail sales increased 13.2 percent year on year in August, up a bit from July's 13.1 percent but still behind June's 13.7 percent.
Analysts attributed the economic slowdown to diminishing external demand and authorities' hesitance to issue stimulus policies for fear of stoking inflation.
The impact of the eurozone crisis was underestimated, while credit injections were smaller than expected because of weak borrowing demand, Liu Yuanchun, deputy head of the School of Economics at Renmin University of China, told Xinhua news agency.
He predicted the weakness to last in the third quarter, although accelerated government investment and previous pro-growth policies may make a difference.
Cao Yuanzheng, chief economist at Bank of China, said the country's economic growth momentum could hardly be restored if policies remained inactive.
"China's era of double-digit economic expansion has virtually come to an end," Cao said. "What the government needs to do is to find a balancing point amid the economic downturn that can keep the growth stable at around 8 percent."
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said China needed to take more aggressive monetary policy moves to enrich liquidity and stabilize growth.
But Chris Leung, a senior economist at DBS Bank, said that China's caution was the proper approach for longer-term policy effectiveness and to avoid resurgence of high inflation.
The Consumer Price Index, a key gauge of inflation, expanded 2 percent from a year earlier last month, up from July's increase of 1.8 percent and ending a streak of four straight months' decline, the National Bureau of Statistics said yesterday.
Food costs, nearly a third of the basket, spurred the rebound by rising 3.4 percent last month, accelerating from 2.4 percent in July. A surge in corn and grain prices around the world and bad weather affecting the vegetable crop were cited as partly to blame.
In comparison, costs in the non-food sector increased 1.4 percent last month, lower than July's 1.5-percent gain.
Zuo Xiaolei, an economist at China Galaxy Securities, said the rise in inflation was expected.
"This CPI rebound does not mean China's economy has bottomed out," Zuo said. "It is mainly a reflection of seasonal factors, as well as changing supply and demand after recent natural disasters. They make it more difficult for China to launch further easing policies."
Wang Jun, a researcher with the China Center for International Economic Exchanges, urged the government to further loosen the monetary supply despite the rebounding inflation, as he expected the CPI to retreat again in the fourth quarter.
Other indicators showed extended weaknesses in China's economy, instead of the mild recovery analysts had expected.
The Producer Price Index, the factory-gate measurement of inflation, fell 3.5 percent year on year in August, a 34-month low from July's drop of 2.9 percent.
Industrial production grew 8.9 percent annually last month, a three-year low down further from July's 9.2 percent.
Fixed-asset investment in the first eight months rose 20.2 percent, also 0.2 points slower than that during the January-July period and defying market estimates of a strong rebound after faster approvals of investment projects since June. Retail sales increased 13.2 percent year on year in August, up a bit from July's 13.1 percent but still behind June's 13.7 percent.
Analysts attributed the economic slowdown to diminishing external demand and authorities' hesitance to issue stimulus policies for fear of stoking inflation.
The impact of the eurozone crisis was underestimated, while credit injections were smaller than expected because of weak borrowing demand, Liu Yuanchun, deputy head of the School of Economics at Renmin University of China, told Xinhua news agency.
He predicted the weakness to last in the third quarter, although accelerated government investment and previous pro-growth policies may make a difference.
Cao Yuanzheng, chief economist at Bank of China, said the country's economic growth momentum could hardly be restored if policies remained inactive.
"China's era of double-digit economic expansion has virtually come to an end," Cao said. "What the government needs to do is to find a balancing point amid the economic downturn that can keep the growth stable at around 8 percent."
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said China needed to take more aggressive monetary policy moves to enrich liquidity and stabilize growth.
But Chris Leung, a senior economist at DBS Bank, said that China's caution was the proper approach for longer-term policy effectiveness and to avoid resurgence of high inflation.
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