Weaker June inflation data may prompt more stimulus from Beijing
Lower consumer inflation and continuing decline in producer price index could prompt Beijing to launch stronger growth measures
China's consumer inflation cooled slightly more than expected in June, pointing to lingering weakness in the economy which could prompt Beijing to launch further stimulus measures to shore up growth.
The consumer price index (CPI) rose 2.3 per cent in June from a year earlier, down from 2.5 per cent in May, the National Bureau of Statistics said yesterday.
The producer price index (PPI) dropped 1.1 per cent in its 28th straight month of decline, versus a market consensus for a fall of 1 per cent, signalling that demand in the domestic economy remained lukewarm.
"The weak inflation data leaves more scope for Beijing to step up use of targeted measures and even opens the opportunity window for blanket easing policy, such as an interest rate cut, to support economic growth," said Wang Jin, an analyst at Guotai Junan Securities in Shanghai.
Most economists believe Beijing will roll out fresh stimulus measures in coming months to ensure 2015 economic growth meets its target of 7.5 per cent, but they are divided whether it will stick to small-scale measures used so far or take more aggressive steps such as interest rate cuts or a nation-wide reduction in bank reserves.
Policymakers are reluctant to announce a massive stimulus programme like the one adopted during the 2008-09 global financial crisis, which fuelled inflation.
