Rising prices eat into incomes

PUBLISHED : Saturday, 26 April, 2008, 12:00am
UPDATED : Saturday, 26 April, 2008, 12:00am

Urban residents saw growth in their incomes and consumption slow abruptly in the first quarter.

Rising prices also eroded much of their gains and a slowing economy and bearish stock market curtailed spending.

In nominal terms the per capita disposable income of urban dwellers grew 11.5 per cent compared with a year earlier, to reach 4,386 yuan (HK$4,875) in the first three months of the year, the National Bureau of Statistics said yesterday.

But factoring in the effect of price rises, incomes grew 3.4 per cent from a year earlier, the agency said.

That was an abrupt slowdown from nominal growth of 17.5 per cent year on year and real growth of 12.2 per cent for all of last year.

Average consumer expenditure rose 10 per cent nominally to reach 2,882 yuan in the first quarter. But in real terms it grew only 2 per cent.

That also represented a sharp decline in growth compared with annual nominal growth of 17.2 per cent and real growth of 12.4 per cent for all of last year.

Economists said record-high inflation had eroded much of the gains. A slump in the stock market and slowing economic growth had contributed to the decline in both revenue and spending.

'Inflation is chiefly to blame as it has eaten up much of the nominal gains,' said Yi Xianrong, a senior researcher with the Chinese Academy of Social Sciences' Financial Research Institute. Consumer inflation reached an 11-year high of 8 per cent in the first quarter this year.

Economic growth eased slightly to 10.6 per cent in the first quarter of the year, compared with 11.9 per cent for the same period last year.

The government has said inflation is the No 1 enemy as leaders are worried that rising prices will hurt middle- and low-income families and trigger social unrest.

Prices on the stock market plunged almost 40 per cent in the first quarter, leaving the great majority of small investors with losses.

The growth in farmers' disposable income also slowed in the first quarter despite government support to raise their revenues and rising grain and food prices.