Inflation steady at 2.3% amid mixed growth data
Print Edition
INFLATION remained relatively low last month, giving the government room to maintain its accommodative policy stance amid mixed signals about the state of the economy.
The consumer price index for July rose 2.3 percent year on year, unchanged from June, the National Bureau of Statistics said yesterday.
Food costs, which account for about a third of the index’s weighting, grew 3.6 percent in the period, slowing from 3.7 percent a month earlier.
“July saw a sufficient supply of food, and although the prices of eggs, vegetables and pork all rose, that was offset by a 6.3 percent dip in the price of fresh fruit,” said Yu Qiumei, an analyst at the bureau.
Zhou Hao, an economist at Australia & New Zealand Banking Group, said China’s inflation outlook remains mild, and that there is even a possibility of deflation if the economic growth momentum weakens again.
“The trend can be seen in the Alibaba Shopping Price Index — based on 100,000 core products from Alibaba’s retail platforms — which has been in negative territory for the past two years,” Zhou said.
The deflationary risk is also reflected in the producer price index, a measure of inflation at the factory gate, which fell 0.9 percent in July. The gauge has been negative for 29 straight months, though last month’s reading saw a narrowing from 1.1 percent in June.
“Against this backdrop, the central bank should maintain an accommodative bias in its monetary policy stance,” Zhou said.
“Decisions on whether or not to adjust the reserve requirement ratio should be based on data output and capital flows.”
The latest economic activity data are scheduled to be released on Wednesday, while the central bank is expected to publish its M2 money supply figures soon.
Despite Zhou’s view, other economists have said that a further reduction of the reserve requirement — which would give banks greater freedom to lend and hence increase market liquidity — is unlikely.
In its most recent monetary policy report, the central bank said that such a move was not an optimal policy instrument given the rapid growth of M2.
Along with lower loan-to-deposit ratios for banks and investment in infrastructure construction, the reserve requirement cut was part of the government’s mini-stimulus program introduced in March, which has played a key role in stabilizing the economy.
That said, recent economic data have been mixed. The official purchasing managers’ index rose to 51.7 in July — its highest level for more than two years — but the corresponding measure for the service sector fell to a six-month low of 54.2.
Also, while exports rose faster than expected last month, imports fell unexpectedly, indicating weak domestic demand.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
