Weak CPI growth, deflation lingers
Print Edition
CHINA’S inflation growth remained weak in March as deflationary pressure lingers in the economy, but that should provide room for the government to roll out more easing policies, according to the National Bureau of Statistics yesterday.
The Consumer Price Index, the main gauge of inflation, rose 1.4 percent from a year earlier last month, flat from February. Food prices, which account for nearly one third in the CPI basket, rose 2.3 percent in March, lower than the 2.4-percent gain a month earlier.
Meanwhile, the Producer Price Index, the factory-gate measurement of inflation and a harbinger of future prices at the consumer end, fell 4.6 percent in March, compared to the 4.8-percent drop in February.
Yu Qiumei, a researcher at the bureau, said inflation weakened as the effects of the Chinese New Year holiday spending faded, which helped cut costs of food and services like travel.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, also said the inflation situation suggests that the government may further ease monetary policies to fight rising deflation risks.
“In spite of much better onshore market liquidity conditions, we think further monetary easing is needed,” Zhou said. “We maintain our forecast that the central bank will cut the reserve requirement ratio by another 1 point before the end of the third quarter.”
The People’s Bank of China surprised the market by cutting interest rates in February — the second time in three months — to bolster market liquidity. It also cut reserve requirement ratio in February so that commercial banks have more money to lend.
Central bank Governor Zhou Xiaochuan said last month that China needs to be vigilant about deflation. The government set this year’s inflation target at around 3 percent.
In the first quarter, China’s consumer prices rose 1.2 percent year on year, while producer prices fell 4.6 percent.
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