Beijing still has room to stimulate economy as prices rise 2.4pc

PUBLISHED : Friday, 11 April, 2014, 10:05am
UPDATED : Saturday, 12 April, 2014, 12:09am

The mainland's consumer inflation edged up last month as food prices rose despite signs that the economy is slowing.

Consumer prices rose 2.4 per cent from a year earlier, up from February's 2 per cent gain, government data showed. The increase was driven by a 4.1 per cent jump in food costs.

Producer prices dropped 2.3 per cent in a sign of weakening economic growth, the National Bureau of Statistics reported. It was their 25th consecutive month of decline.

Inflation still is well below the official target for the year of 3.5 per cent, leaving Beijing room to stimulate the slowing economy with interest rate cuts or other measures if necessary.

Imports shrank 11.3 per cent in a sign of weak domestic demand while manufacturing failed to pick up as it usually does following the end of the Lunar New Year holiday.

On Thursday, Premier Li Keqiang ruled out new stimulus in response to short-term economic fluctuations. In a speech, he appeared to try to prepare companies and the public for the possibility that the mainland might fall short of its 7.5 per cent official growth target this year.

Relatively low inflation could give Beijing room to carry out promised reforms to make prices of electric power, gas, water and other resources more market-oriented, said JP Morgan economist Zhu Haibin in a report. That is intended to make the economy more efficient and productive by removing hidden subsidies that encourage waste.

The steady decline in producer prices "seems more worrying", he said, adding that it reflected a glut of excess supply in a number of industries that was depressing profits and could dim prospects for a rebound in investment this year.

Last year's growth of 7.7 per cent tied 2012 for the lowest since 1999. Unexpectedly weak performance, especially in trade, has prompted suggestions that Beijing might face a rise in job losses that could force it to backtrack and prop up growth with renewed stimulus.