ecns [expanded by feedex.net]: Slower CPI rise may favor positive policies

ecns [expanded by feedex.net]

ecns

Slower CPI rise may favor positive policies
http://www.ecns.cn/business/2014/03-10/104021.shtml
Mar 9th 2014, 23:35

2014-03-10 08:35 Shanghai Daily Web Editor: qindexing


The drop in China's inflation growth to a 13-month low in February may see the government adopt more favorable policies after exports slumped amid a possible cooling in the world's second-largest economy.


The Consumer Price Index, the main gauge of inflation, rose 2 percent from a year earlier last month, slowing from the pace of 2.5 percent in January and below expectations, the National Bureau of Statistics said yesterday.


The Producer Price Index, the factory-gate measurement of inflation, also fell 2 percent year on year last month, lower than January's fall of 1.6 percent and indicating that consumer prices may rise at a slower pace in the future.


Yu Qiumei, analyst at the bureau, said the CPI growth slowed sharply because of a high comparative base last year while the rise in food costs, which take up nearly one third in the overall basket, continued to be flat during the Spring Festival holiday.


Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said lower consumption during the festival probably accounted for the CPI's lower reading because of the government's fiscal austerity and anti-corruption efforts.


The festival consumption rose 13.3 percent, down from the growth of 14.7 percent during the festival in 2013, the Ministry of Commerce said.


Lian Ping, chief economist at the Bank of Communications, foresaw low inflationary pressure this year and said this could create room for China to adopt more accommodative policies.


China's growth pace seems to be slowing because official data showed exports slumping 18.1 percent from a year earlier in February, worse than expected, while manufacturing activity grew at the slowest pace in eight months as production eased and new orders sank.


"The GDP growth in the first half of 2014 will likely be below 7.5 percent, which could trigger further policy easing over the foreseeable future," ANZ's Zhou said.


However, China's stubbornly weak producer prices are the most worrying.


After falling every month for two years, producer deflation shows no signs of abating. The producer price index fell by its most in seven months in February. Prices fell across the board, from means of production to raw materials, both of which were at their weakest in seven months.


"The risk of deflation is rising in the near term," Zhou said.


Analysts do not agree on what is driving producer prices lower. Some say it is a symptom of sluggish consumer demand. Others say it is a result of excess capacity in a handful of raw material industries including cement, glass, and steel.





You are receiving this email because you subscribed to this feed at https://blogtrottr.com

If you no longer wish to receive these emails, you can unsubscribe here:
https://blogtrottr.com/unsubscribe/qhG/Zc7fXt