Following yesterday's release of a swathe of mainland data showing slower growth and lower inflation, there is widespread speculation that Beijing will ease up on the monetary policy brakes going into the second half of the year. A closer look at the numbers, however, shows that loosening now could be a big mistake. At first glance, the figures look like a thumping triumph for the mainland government's economic management. Growth cooled to 10.1 per cent in the second quarter of the year from 10.6 per cent over the three months to March and a blistering 12.6 per cent for the second quarter of last year. Meanwhile, consumer inflation subsided to 7.1 per cent in June from 7.7 per cent in May and well below the painful 8.7 per cent rate recorded in February. Whatever the causes of the slowdown - stricter bank loan rationing, a stronger currency, softening export demand or resurgent farm production lowering food prices - the outcome looks very much like the desired result for an economy that earlier this year appeared dangerously overheated. Now that things seem to be slowing down, expectations are growing that Beijing is preparing to relax its policies a little to boost activity as some of the country's export markets slide closer to recession. That would certainly please the powerful Ministry of Commerce which has been lobbying hard for a slower rate of yuan appreciation and tax rebates to support ailing exporters and prevent job losses. Any significant policy easing could well be premature, however. A look at the raw data for the second quarter shows that the mainland's economic output over the three months was 6.9 trillion yuan (HK$7.9 trillion), up 20.1 per cent from a year ago, not the 10.1 per cent announced yesterday (please see the first chart below). The difference is explained by what the statistics bureau calls 'price factors', which means it corrects the raw, nominal data for inflation. But to get a corrected growth figure of 10.1 per cent from raw data showing 20.1 per cent, Beijing's statisticians must have used an inflation rate of 9.1 per cent, not the 7.1 per cent consumer inflation rate they announced for June (see the second chart). This discrepancy is not too surprising. To come up with their growth figures, the number crunchers don't just look at the price rises consumers see but at inflation across the whole economy, a figure known as the GDP deflator. And although consumer inflation may have dipped to 7.1 per cent last month on declining food prices, inflation in other sectors continued to climb, with producer price inflation hitting 8.8 per cent and raw material prices up 11.1 per cent over a year ago. These higher rates of wholesale inflation imply there are more consumer price increases on the way, which means it is far too early to be thinking about easing monetary policy. There is, of course, another possible explanation for the discrepancy in the data: that the headline inflation rate is more or less accurate but that growth is far stronger than the official rate indicates at least 12 per cent. Either way, this is no time for Beijing to be taking its foot off the brakes.