More room for policy easing after China CPI rises at slowest rate in 13 months
The mainland's consumer prices rose at their slowest rate in 13 months in February as pork prices fell the most in more than a year, a sign that slowing growth rather than rising prices poses a bigger risk to the economy.
The consumer price index rose 2 per cent from a year earlier, the National Bureau of Statistics said yesterday, exactly in line with market expectations. Pork prices fell 9 per cent.
And in an indication that the mainland economy is fighting substantial slack, producer prices fell for the 24th consecutive month, dropping 2 per cent, slightly above forecasts for a 1.9 per cent decline.
The tepid price data could fuel investor worries about the health of the mainland economy, which drew new concerns after figures showed export growth slumped nearly a fifth last month.
Some analysts say that at least with inflation clearly not a threat, Beijing will have the room to loosen policies to bolster the economy if it needs to.
"Low inflation could be good news for markets as monetary tightening is definitely not justified," said Lu Ting, an economist at Bank of America Merrill Lynch. "Low inflation gives the People's Bank of China more room to ease the liquidity situation and tame rising rates."
After 30 years of stellar annual growth rates that averaged at least 10 per cent, the mainland is moving into slower but high-quality growth, away from its previous export and investment-driven model.
But the transition has not been easy. Much of the data out this year showed the powerful Chinese growth engine had had a difficult start as factories fought months of low business orders and export growth whipsawed, unnerving global investors.
That has led analysts to say Beijing may need to ease policies if it wishes to meet its annual 7.5 per cent growth target, slightly below last year's 7.7 per cent expansion.
Yet it is not clear the target is binding. The finance minister said last week that it was all right if the mainland slightly missed its growth target as long as enough jobs were created, suggesting Beijing was ready to stomach slower growth to make room for sweeping reforms.